What is a Construction Loan?

General and Administrative Costs (G&A) in the construction industry refer to expenses associated with day-to-day operations that are not directly tied to a specific project. These are necessary costs for a business to operate but are not easily assignable to a particular construction job. They typically include office rent, utilities, office supplies, insurance, legal fees, accounting services, salaries of non-project related staff, and other management expenses. It's important for construction businesses to carefully manage G&A costs as they can significantly impact the profitability if not monitored and controlled carefully. These costs are usually spread proportionately across various projects, based on some measure like total project labor costs. A high amount might indicate inefficiency, while a very low amount could suggest underinvestment.

Bottom-of-Chain or Low-Tier in the construction industry refers to the lowest level of subcontractors or suppliers involved in a construction project. They are at the end of the construction chain, typically providing specific services or materials as subcontracted by higher-tier companies. These can include specialized tasks like electrical work, plumbing, landscaping, or supply of construction materials. Their work is crucial as they lay the foundation for more complex tasks to be executed by upper-tier contractors. They are also bound by the contracts in place, like other members of the chain, although directly managed by mid-tier subcontractors instead of the main contractor.

Accrued revenue is the income a subcontractor has earned for work performed or in progress but has not yet billed (the general contractor or client) or received payment for. This typically happens due to the nature of construction contracts, where payments are often tied to milestones or project completion.

Example: An electrical subcontractor working on a large commercial building is paid based on completed milestones, with invoices due at the end of each month. By June 30th, they've finished 75% of the $100,000 job, but can't invoice until month-end. The $75,000 earned but not yet invoiced is their accrued revenue.

Tracking accrued revenue is crucial for accurate financial reporting, as it reflects the subcontractor’s economic activity for the period—even before invoicing or receiving payment. To gain even deeper financial insights, many subcontractors turn to Siteline. Our tool is tailored to help track pay application statuses and amounts owed, empowering subcontractors to make more informed, strategic decisions. Experience the benefits firsthand by scheduling a Siteline demo today.