Billing reconciliation in residential construction


What is billing reconciliation?

Billing reconciliation is the process of matching statements received from sellers to the amounts that are entered into your accounting system to pay said bills. This process ensures that buyers do not overpay or underpay for materials or services and enables buyers the opportunity to doublecheck that they are not paying for something that they did not receive. This process helps buyers catch billing mistakes and fraud to pay the correct amount for goods and services.

Why is billing reconciliation important in residential construction?

In residential construction billing reconciliation is another layer of protection for contractors to implement to protect their profit margins. An average home building project can have anywhere from 6 to 10 vendors submitting bills for portions of a construction project. During a build, the priority for many contractors is to keep the project on track and ensure they have the right materials or trade partners on hand to do so. This means that the contractor’s focus may be on progress, and they will get to the bill later. While this is critically important to keeping project timelines intact, which also affects profit margins, billing reconciliation helps contractors ensure they only pay for what was delivered or the work accomplished.

With labor shortages plaguing the residential construction industry billing reconciliation has taken on even more importance. As demand for trade partners has soared, they have their pick of projects to take on and businesses to work with. An unfortunate billing mishap could not only affect the profit margin on a project but the ability to secure future work with that trade partner.

How do contractors reconcile their billing?

Manual methods

Contractors can reconcile their billing manually by comparing bill amounts on paper or electronic receipts to the amount entered into their accounting system, whether it is tracked in a spreadsheet or in a checkbook. The downside to manually reconciling billing is it requires a lot of time and organization to keep track of all receipts received on and off the jobsite and then checking them off one-by-one against your ledger.  

Bill reconciliation software

Billing software such as QuickBooks helps contractors automate portions of their reconciliation process. These solutions enable contractors to track their cash outlay in an online portal which helps reduce manual errors but still requires time to reconcile bills with their system. This type of software is used by a bookkeeper or accountant so project managers or owners are not as involved and must wait to hear how the reconciliation goes. Overall, software speeds up the process compared to manual solutions but still requires jumping between programs to match up numbers.

Integrated construction project management

Integrated construction management software tools like CoConstruct help contractors speed up their reconciling process while saving time by bringing all project information into one online portal. In integrated solutions, contractors have all project details, including bills from vendors, in one system so project managers can verify completed work to approve bills and push them to bookkeepers to cut checks. This connection also allows bookkeepers to sync their accounting system with their budget where they can confirm that the amount paid matches their billed amount with real-time data. This lets the billing reconciliation process become a quick glance through their budget to double-check that their budget-actuals match the estimates provided by their trade partners. Reducing manual work reduces the likelihood of costly and time-consuming errors not just to a project’s bottom line but to an important relationship with a trade partner.  

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Megan Sullivan
Megan Sullivan

Megan manages the production of engaging, data-driven content that builds connections and helps builders + remodelers move businesses forward.