Types of Construction Billing & Best Practices

Put those two factors together and it’s easy to see how the construction billing process can get quite complex. Increasingly, contractors and owners alike rely on software to track project budgets, invoices and costs. Construction management software can often integrate directly with accounting software to simplify and even automate the exchange of project and financial data. By establishing a single source of truth for tracking costs, change orders, and compliance to ensure a faster, more efficient invoicing process.

• Most importantly, it provides clear financial insights so construction businesses can make better decisions and avoid unexpected costs.
• Now, that doesn’t mean that substantial payment talks can’t happen in person, over the phone, or via text.
• The details of a construction invoice will vary based on the project size, the contract and who is submitting the invoice.
• Margins are tighter than ever in this industry, and it shouldn’t take discounts and incentives to be paid fairly.
• Moon Invoice offers payment reminders, which can help ensure that invoices are paid on time.
• Contractors are paid for the work they document, not necessarily the work they perform.

Arrears billing method

The system streamlines the process, making it easy to enter, edit, and review transactions without unnecessary delays. In construction, invoices often include multiple cost categories—materials, labor, subcontractors, and overhead—so managing them without switching between different modules saves time. Unlike some accounting solutions that become cumbersome with increased transactions and projects, this system can handle expanding operations without losing efficiency. The software doesn’t slow bookkeeping for cleaning business down or become harder to use as the number of projects, subcontractors, and employees increases.

The Best Cloud Construction Project Management Software

Procore’s most frequently mentioned strength is its ability to maintain detailed compliance records. A system that logs every document, approval, and financial transaction can make audits smoother. While Procore provides standard templates, they don’t always fit specific construction invoice reporting needs.

• Construction billing is the process of invoicing clients for completed construction work, including labor, materials, equipment rental, and other project-related expenses.
• Daily reports, which many consider one of the more important aspects of successful project management, document the daily activities on a project.
• Paired with that, a good billing system also provides legal protection to both parties.
• That could lead to discrepancies requiring manual fixes, an extra step that users probably wouldn’t expect.
• This invoice reflects the agreed-upon amount after valuations, deductions, and retentions.
• In this way GMP can be seen as a medium ground between lump sum and time and materials billing.
• Finally, FreshBooks’ iOS and Android mobile apps provide customizable invoice functionality on the go.

What Is Underbilling? Construction Industry Accounting

By using a contingency fund, the contractor can cover the costs of some changes to the original scope of work. While general conditions are often overlooked, they can significantly impact the overall cost of the project. It is essential to accurately estimate these costs to ensure that the budget remains realistic and comprehensive. Typically, contingency funds range from 5% to 10% of the total construction budget, depending on the complexity of the project. Properly estimating and allocating contingency funds can help prevent project delays and cost overruns. There should be no contribution margin spelling mistakes or grammatical errors, and the layout should be easy to read.

• Moreover, integrating QuickBooks with other platforms—like project management software, payroll systems, and CRM tools—creates a centralized system where all your data can be accessed and analyzed easily.
• Effective construction billing is essential for maintaining project cash flow, ensuring fair compensation, and reducing financial risks.
• The specific line items of an invoice will vary depending on a few different factors.
• Everyone makes mistakes, but when your financial livelihood depends on it, you want the details to be as accurate as possible.
• It calculates revenue based on the ratio of costs incurred to total estimated costs, providing a detailed view of project progress.
• Invoicing in the construction industry can be especially tricky because of complex projects, changing project costs, and coordinating with multiple subcontractors.

It doesn’t matter what material you’re sending out; you want to make sure it’s consistent with your brand. Custom designing your invoices will not only improve your company’s image, it will also ensure your invoices stand out, which means you’ll be remembered. Being remembered is a key component of customer retention, and it plays a notable role in your payment reliability and brand positioning.