5 Easy Construction Billing Methods For Contractors & Entrepreneurs

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Being an owner of a construction company, you may find it difficult to organize and extract essential payment information to get paid as and when required. Also, you need to perform some manual operations like forming working strategies, revenue recognition, and identifying the breakdown of labor costs.

Construction project managers will have challenges related to the construction billing process. Some aspects such as billing period, indirect costs, or project costs may negatively influence the project’s progress. Hence, it is necessary to choose perfect construction billing methods for your construction accounting.

Moving on, here we will discuss more the billing methods for construction contracts and different types of billing. By understanding them, you may not have conflicts with the clients at the time of the construction billing process. Plus, you may receive payment faster. Now, let’s check them out.

What Is Billing Method In Construction Industry?

A billing method is used by the construction contractors to identify the cost of a job done by the tradesmen and services delivered to the clients. In short, it is a process to send the invoices to the client as a payment request.

This is how you may not have any communication gaps at the time of billing and it enhances the overall productivity of your business. Below are the different billing methods that you can choose to form stable financial management.

  • Progress Billing

    The progress billing method is used to generate the invoices which means that the project completion regardless of any delays. If progress billing is not done, the hiring party may raise concerns over the amount or project timeline.

  • Fixed Price

    It is the common billing method for the construction contract. Fixed price billing is also known as a lump sum contract or standard price. It is used to charge the total amount in the one-time service. As soon as the product or service is delivered, payment is made for the service rendered.

  • Material And Cost Plus Contracts

    Contractors analyze the material cost and then pre-defines the amount while generating the cost-plus billing. Such cost-plus contracts consist of the total amount and profit earned by the contractors. It is a suitable contract for professional contractors which may have amendments before or after.

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5 Billing Practices For Construction Companies

Here are some of the best practices that you should consider for your construction projects.

Best billing practices for construction companies

  1. Generate Detailed Invoices and Send Them Instantly

    Firstly, you should generate invoices by filling in the necessary details. Add net amount depending on fixed rate or unit price contract, shipping address, contact information, and available payment modes. Once an invoice is made, you should recheck it for billing errors or spelling errors.

    Thereafter, you should send it to your client as quickly as possible. This is because the longer you wait, the longer you have payment delays. In case the invoices are sent late, there are chances that you may receive late payments. Consequently, you may not have smooth cash flow in your business. Therefore, we suggest you must send timely invoices to the clients. And the best way to get it quickly is by an online invoice builder.

  2. Describe Payment Instruction

    Another important note you need to insert at the time of invoice generation is to mention the payment instruction in detail. Longer payment instructions may lead to a higher debt ratio, which can be critical for the companies’ finance. So you can describe it in a short note at the bottom of the invoice.

    It is necessary to clearly outline the important payment guideline for customers to know exactly when you are expecting payment. But do not try to include burdensome terms and conditions along with payment instructions. Build trust and a collaborative relationship with your client so that you can help them on the path towards securing better terms.

  3. Offer Discounts On Advance Payments

    In the construction industry, customers will find your construction business interesting if you have discounts on your contract price. Yes, it is the easiest way to get payments faster if you come up with discount schemes for your service. On the other hand, you can introduce charges for the late payers to penalize late payments.

    So, if the customer pays after the due date, you can ask them to pay late fees. By introducing these two schemes in the construction contracts, you may have a reduced number of unpaid invoices and more service buyers. In terms of discounts and late payments, you should inform them about your payment expectation as well.

  4. Take A Follow Up For Unpaid Invoices

    When you are into the construction business, you might have to be on your toes to chase payments. This could be the result of the outstanding invoices which have overdue payments. In such cases, immediately send a reminder to your clients to understand your concern. Downloading InvoiceOwl App, you will not have to search unpaid invoices, as you will be notified once the client’s payment is due.

    Professionals who are running construction businesses take follow up by sending emails or direct phone calls. By taking follow-ups you would be sure of getting paid for what you have worked. Also, you can talk to the customer about the pending invoice before sending an email. It will be a professional way to contact your clients in case they have due payment.

  5. Adapt The Accounting System

    Mostly, construction companies prefer to use the invoicing software where they may not have to enter details manually. Also, it would help them to have a reduced workload. We recommend professionals from the construction industry use an invoice generator. The automated software designed for the construction project will help you choose a suitable template as per your requirement.

    At InvoiceOwl, your billing process will not be time-consuming and you will fewer errors when you have e-invoices. Moreover, it would be easier to save records of paid and unpaid transactions, which will help you at the time of tax reporting. Overall, you don’t have to maintain a ledger, and billing clients would be easy-peasy.

Frequently Asked Questions
  1. Being a contractor when should I send invoices?

    There is no deadline to send the construction invoices. But, the contractor must start creating invoices as soon as they start their new project. Once the project is done they should immediately send invoices to the clients so that the client can pay you on time. Also, you can send invoices while the work is being done and request the client for advance payment.


  2. How can an invoice be both a purchase invoice and a sales invoice?

    An invoice can be both a purchase invoice and a sales invoice if the invoice is generated by a neutral third party to acknowledge the transaction.


  3. What are construction invoice templates in the construction industry?

    Construction invoice templates are one of the easiest ways for a contractor to generate invoices. It comes with pre-filled information related to the construction industry where a contractor just needs to add their hours and description of the services. The construction invoice template is created to ease the work of a contractor and help them get paid faster.


  4. What are the standard payment terms on the construction invoice template?

    The standard payment terms illustrated on the sample construction invoice template helps customers to know when exactly the contractor is expecting payment. And what will be the consequences if they don’t pay the total cost on time or at the payment due date. In the future, a contractor can modify the standard payment terms as per the client’s agreement before issuing the invoices.


  5. What are the necessary details to enter in a construction invoice?

    Below are the essential details you need to enter while creating an invoice.

    • Business name and logo
    • Billing name and contact details
    • Shipping address
    • Product quantity and description
    • Payment note
    • Contract price and the net amount
    • Invoice number and due date
    • Payment options

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Conclusion
We understood how construction invoice helps the contractors to create invoices by adding essential information related to work completed and materials used. By using construction invoice templates in your business, you can easily:

  • Generate professionally-looking invoices
  • Send invoices quickly to the customers
  • Get paid on time
  • Improve your business efficiency

Also, we learned the best practices that you can apply and make your work easier. On the ending note, it is better to adopt online invoicing software solutions like InvoiceOwl that offers customized invoice templates in Word, Excel, and even PDF formats to create invoices as per your business needs.

Author Bio
Jeel Patel
Jeel Patel
Founder

Jeel Patel is the Founder of InvoiceOwl and is the main curator & writer of the content found on this site. With ideals of quality, commitment, and perseverance, he believes in creating lasting business relationships with the clients.

United States

Washington D.C.

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