Billing in residential construction

Glossary

What is a bill?

A bill is a document detailing the exchange of goods and services for agreed upon prices. This document is issued by sellers to buyers to document the transaction details such as quantities, payment information, and any deadlines. While billing and invoicing sometimes are considered interchangeable, often buyers receive a bill and sellers issue invoices.  

Billing is an important business process because it ensures that sellers are paid for their services in a timely manner and it allows both parties to have a paper trail to reference should any questions arise. It also helps buyers confirm that work completed or materials delivered match expectations.  

Why is billing important in construction?

Construction billing is important because typically contractors send invoices and receive bills all while working on a job so staying organized and efficiently processing outgoing and incoming payments is vital to keeping a company running smoothly and a project timeline intact. For the purposes of this post, we will focus on the residential construction billing process and not the construction invoicing process.

Once contractors receive a bill, they need to confirm that the work was accomplished or that the correct type and quantity of materials were delivered. Often this is done by a team member or project manager who is on the jobsite and can verify the work and relay it to an admin or bookkeeper. The admin or bookkeeper then begins to process the bill to pay trade partners in a timely manner. This all quickly becomes more complicated, however, when bookkeepers are tasked with processing both paper and electronic bills into their accounting system to accurately track financials and profit margins.  

What are common construction billing methods?

Manual methods

Using manual methods contractors can track their incoming and outgoing bills by entering all their information onto spreadsheets such as Microsoft Excel or Google Sheets. From there they can compare their numbers to their original estimate and use formulas to calculate where their project finances currently stand. Additionally, these methods require bookkeepers to manually check that there is enough money in accounts to pay out trade partners for their completed work. Any data entry or formula errors could result in ruined profit margins on a project.

Construction billing software

Using billing software such as QuickBooks, contractors can automate portions of the billing process such as pulling key details into invoices, creating and sending bills, and receiving payments. Compared to manual methods billing software helps save contractors time and reduces the likelihood of mistakes in the process. Unfortunately, these methods still require bookkeepers to input data from outside sources such as estimates, email invoices, and more.

Integrated construction project management

In construction project management software contractors work in sync with their bookkeepers by automatically passing project data between their construction and accounting systems with the click of a button to stop data double entry and save time.  

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Harry Wahl
Harry Wahl
Marketing

Harry helps create data-driven content for the residential construction industry including case studies, customer stories, industry trends and more.