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Billings in Excess of Costs
What is Billings in Excess of Costs?
Billings in excess of costs (also called overbillings) occur when you’ve invoiced your client for more work than you’ve actually completed or incurred costs for. In other words, it represents getting paid ahead of your work schedule.
Here’s how it works: If you’re a concrete subcontractor on a $100,000 job and you bill 50% upfront ($50,000) but have only completed $30,000 worth of work, that $20,000 difference is your billings in excess of costs. You owe your client that work, and until you complete it, that $20,000 remains as a liability on your balance sheet.
For subcontractors, understanding billing in excess of costs is essential because it can be a strategic cash flow tool when used carefully. For example, when bidding on a job, you can be smart about how you structure your schedule of values (SOV)—breaking work down into more detailed line items that allow earlier billing. However, this strategy requires regular monitoring to ensure:
- Your billing somewhat aligns with your actual percentage complete, and
- The remaining contract value will still cover your remaining costs.
The biggest risk of overbilling is thinking your margins look better than they are, simply because you’re collecting cash faster. Surety companies and lenders also scrutinize overbillings closely, as excessive amounts can signal poor project management or potential cash flow problems down the road.
With Siteline, you can easily track whether you’re billing in excess of your costs by pulling your month-to-month incurred costs and comparing them against your billing progress. This real-time visibility helps ensure you’re billing appropriately while maintaining realistic profitability expectations. If you’re interested in seeing for yourself, schedule a personalized demo of Siteline here.
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Other construction terms
What is a Voluntary Document?
A Voluntary Document in the construction industry refers to a document that is not legally mandated but is often used to provide guidelines or recommendations to improve performance or efficiency in the construction process. These documents can serve various purposes such as setting industry standards, outlining best practices, facilitating coordination between different project stakeholders, or promoting sustainability. Examples of voluntary documents in the construction industry include technical specifications, quality guidelines, safety protocols, environmental guidelines, or even design criteria. While these documents are not legally binding, they often influence construction operations due to their direct impact on project quality, safety, and cost-effectiveness.
What is a Schedule of Values (SOV)?
A Schedule of Values (SOV) is a detailed breakdown of a construction contract that itemizes the total contract amount into specific work categories, phases, or deliverables. It shows the dollar value assigned to each component of work that’ll be completed during a construction project. As such, the SOV is a critical component of successful project and cash flow management. It also lays the groundwork for progress billing and payment applications (like AIA® G702/G703® forms).
Here’s how it works:
- Contractors create initial SOVs that allocate contract value across work phases.
- They maintain the SOVs to align with actual work schedules and ensure billing requests match project progress.
- SOVs get updated when changes occur on the job, altering the original scope and budget.
As you can imagine, managing multiple SOVs across projects while tracking actual costs against line items becomes complex and time-consuming.
Siteline streamlines this entire process by integrating with major construction ERPs and accounting software. Subs import project data from their ERP into Siteline, compile and send pay apps directly in the system (accounting for any change orders), and then rest easy knowing that Siteline automatically syncs approved invoices back to the ERP.
The result? Faster billing cycles and quicker payments. Want to see how it works? Book some time with us.
What is a Pre-Lien Notice?
A pre-lien notice, also known as a preliminary notice, is a legal document used in the construction industry to secure payment rights for subcontractors, material suppliers, and other parties involved in the construction project. It is a crucial step in securing the right to payment and can, therefore, directly impact subcontractor cash flows.
The purpose of a pre-lien notice is to inform the property owner, general contractor (GC), and other relevant parties that a subcontractor or supplier has provided labor, materials, or services to the project. By submitting a pre-lien notice, the subcontractor establishes their right to file a mechanic's lien if they are not paid for their work.
The steps to secure payment through the pre-lien notice process are as follows:
- Pre-lien (preliminary) notice: This notice should be submitted at the start of every project, typically within a specified time frame after the subcontractor begins work or delivers materials. It serves as a formal notification of the subcontractor's involvement and their intent to protect their right to payment.
- Notice of intent (NOI): If the subcontractor is not paid for their work after submitting the pre-lien notice, they can issue a notice of intent (NOI) to the property owner, general contractor, and other parties involved. The NOI is the final warning before filing a mechanic's lien, indicating that the subcontractor intends to take legal action to secure payment if the outstanding balance remains unpaid.
- Mechanic's lien: If the subcontractor still does not receive payment after issuing the NOI, they can file a mechanic's lien against the property. A mechanic's lien is a legal claim that encumbers the property, preventing the owner from selling or refinancing until the debt is resolved. This action is typically a last resort to recover unpaid balances. (Check out this blog post to better understand how mechanic’s liens work.)
Siteline—the only billing software built specifically for subcontractors—centralizes and tracks billing statuses across all projects. It provides real-time notifications when payments become overdue, empowering accounting teams to take an active role in collections—like, issuing an NOI (the next step after submitting a pre-lein notice)—to promptly recover payments.
Interested in seeing how Siteline can give you more visibility into your cash flow? Schedule your personalized demo here.
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