What is Construction Billing?

Construction billing is a process of collecting money for products or services rendered. You can include the labor or material costs along with the client’s details while preparing a bill or an invoice. So, basically, construction billing means invoicing clients when you have completed the construction project and requesting money for your services.

Invoicing clients on time without any errors is one of the best construction billing processes to get your bill paid instantly. This way you can keep clients posted about associated project costs and build lasting relationships with them.

6 Common Billing Methods in the Construction Industry

Here are a few methods of billing for construction projects to receive the payment for what you deliver.

1. Lump Sum Progress Payments Billing

A fixed price that needs to be paid upfront or right after the completion of the project. In this method, you will brief the client about the necessary project work and associated costs that need to be paid following the project’s completion.

So, lump sum progress payments are collected at different stages to purchase the required materials to finish the ongoing project works. For example, if the builder has completed a half portion of the construction project, then they might request payment for what’s completed before starting the remaining work.

2. Lump Sum Completion Percentage Billing

Lump sum completion percentage billing is basically AIA-style progress billing, a structured payment method that differs from lump sum progress payments. With this method, the contractor is paid based on the percentage of work completed relative to the total lump sum contract value.

However, the contractor needs to submit the progress report to the client. Thereafter, the client will assess the project status and then proceed with payment. If the project is 50% completed, the contractor will get 50% of the lump sum. This construction method is best for those who are working on long-term projects.

3. Cost Plus Billing

When contractors send high-quality reports to clients to offer insights on growing project costs is considered a cost-plus billing method. Whether it is a material cost or wages of laborers, you need to list them out along with the profit margin when generating a new bill. Therefore, this is a great way to mitigate risk associated with the project’s scope and cost.

Further, it would not be so difficult to adjust costs at the later stages of the project. Say, for example, if there is a sudden increase in materials or labor costs, they need to inform the client by creating a project report. That’s how you need to clearly mention the rise in the project cost and get approval from clients before moving ahead.

4. Guaranteed Maximum Price (GMP)

With GMP, contractors cap the cost to ensure that construction projects are completed without exceeding the client’s budget. This is particularly appealing to clients, as financial security is a top priority. This construction billing method guarantees that the project will be completed within the pre-agreed cost (GMP), meaning clients don’t have to worry about overspending.

On the downside, GMP offers limited flexibility and carries certain risks for contractors. Under this method, project changes or additional work cannot be accommodated. Additionally, if the actual costs exceed the estimated price, the contractor or construction company must cover the extra expenses.

5. Time and Materials Billing

It is a construction billing method where contractors can bill their clients depending on the time spent and materials used to finish the work. Such a construction method can be beneficial for certain projects where determining the estimated cost is somewhat difficult. So, unlike GMP, time and materials billing allows changes or additions to the construction project.

But, at the same time, if unforeseen events occur, then it may result in project delays. In case labor costs get hiked for some reason following the contract agreement, contractors need to pay additional costs. As a result, you might fall short of achieving the desired profit in the construction project.

6. Unit Price Billing

Unit price billing is also the most preferred construction method as contractors only bill the clients as per completed unit work. With unit price billing, contractors can bill clients if work is finished within per square foot or a particular item. For instance, the contractor may ask for $25 per square foot to complete the kitchen area in your ongoing construction project.

Such a method can be effective for projects with repetitive tasks or unit-based work such as roof installation or floor installation. That’s how it allows both parties to manage the project budget efficiently. Some construction companies also include unit price billing with the time and materials billing method.

Best Practices for Construction Billing

Billing your client may be easy, but adhering to these best practices for construction billing will make sure you receive payments timely for what you deliver.

1. Select the Right Time

Generate and send construction project bills at the right time to avoid any further delays. Help your clients understand for what reason you created a bill and enable them to conveniently make the payment. This is an excellent way to maintain healthy relations and get yourself paid.

2. Clarify the Payment Terms

Emphasize the construction payment terms and conditions in such a way that they are easy to read. Describe the late payment charges according to your company’s policy and what are the accepted payment methods. Don’t make things messy by writing lengthy paragraphs.

3. Choose Politely-worded Templates

Prioritize downloading politely-worded invoice templates from online software like Moon Invoice instead of generating poorly-written hard copies. The software will ensure you maintain accuracy and professionalism no matter how hurriedly you create a bill. Once generated, send it using online platforms.

4. Manage Bills Online

Utilize a cloud-enabled invoicing platform to manage your bills online without fear of misplacing them. This practice of managing construction bills online will assist in keeping accurate records. Similarly, your client will find it easier to organize bills if you have presented paperless bills.

Use The Right Construction Billing Software

The construction billing process when coupled with the right construction billing software alleviates how you generate bills.

Regardless of which construction billing method you choose, invoicing software like Moon Invoice ensures no calculation errors with attention-grabbing bills and invoices.

The invoicing software consists of 66+ readymade templates that will aid you in creating professional construction bills in any format.

Further, it has plenty of online payment methods to help you get paid promptly, meaning no need to exchange cash. Besides invoices and bills, you can create construction estimates, receipts, and expense reports.

It centralizes all your important business documents in a cloud environment so that you can generate comprehensive reports to amend your strategies and win more work.

As a result, Moon Invoice could be your go-to construction billing software to enhance customer satisfaction and cultivate desired growth.

Conclusion

By now, you must have decided which construction billing method best suits your business. So, utilize it whenever you want to bill your clients and remember to implement best practices for construction billing. The construction billing process can be facilitated using sophisticated software like Moon Invoice.

It assures seamless bill management across all devices and excellent customer satisfaction. It is an all-in-one software for estimators and contractors to manage important documents and finances.

On top of it, you can convert an estimate into an invoice with one click, simplifying your work and saving hours that can be utilized in core activities. So, brush aside your paper bills and migrate to Moon Invoice by starting a 7-day trial at $0.

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