.svg)
Costs in Excess of Billings
What is costs in excess of billings?
Costs in excess of billings (often called underbillings or earnings in excess of billings) is an asset account on a construction company’s balance sheet representing work performed and expenses incurred that have not yet been billed to the general contractor or project owner.
Underbillings occur when continuous jobsite expenses—such as labor, materials, and mobilization—outpace periodic progress billing cycles or when work is performed on unapproved change orders. Under the percentage-of-completion accounting method, costs in excess of billings reflect earned revenue that will be converted into formal accounts receivable on the next pay application.
How Siteline Helps:
Underbilling ties up cash flow and risks leaving earned revenue on the table. Siteline provides real-time visibility into unbilled work, pending change orders, and job completion milestones—helping trade contractors generate accurate pay apps quickly and turn earned revenue into collected cash.
Trusted by trade contractors across the country
Other construction terms
What is Direct Labor?
Direct labor in the construction industry refers to the workforce directly involved in the construction, alteration or development of a project. This primarily includes on-site workers like carpenters, bricklayers, electricians, plumbers, concrete finishers, steel workers and others who are hands-on in assembling, fabricating, and finishing physical components of a constructed entity. These are the personnel who directly contribute to the construction process by physically constructing or installing components of the project. The expenses incurred for this labor force, including their wages, benefits, and any associated costs, are considered as direct labor costs. It is crucial as the effectiveness and efficiency of the direct labor can greatly impact the project's quality, cost, and timeline. Therefore, project managers in the construction industry often focus a great deal on managing and optimizing direct labor.
What is Actual Cost?
Actual cost, in the construction industry, refers to the accurate amount reasonably spent on a project. This includes every expense incurred during the planning, development, and execution phases. The actual cost often encompasses material expenses, labor charges, equipment costs, and any additional overhead related to the project. For instance, the cost of bricks, cement, construction tools, and an hourly wage for workers constitutes the actual cost. It may differ from the estimated cost due to unforeseen circumstances or changes in the project scope. Monitoring the actual cost is vital for maintaining a project's budget and preventing financial oversights.
What is a Risk-Shifting Mechanism?
A Risk-Shifting Mechanism in the construction industry involves the transfer of potential financial risk from one party to another. Traditional contracts often place the responsibility for risks on the contractor. However, through risk-shifting methods such as sub-contracting, insurance, or performance bonds, some or all of the potential risks can be shifted away from the contractor and onto other parties, like subcontractors or insurance companies. The aim is to balance the risks more equitably, based on which party is best capable of managing those risks and to ensure that the project is not jeopardized due to unforeseen complications or accidents. Properly implemented, a risk-shifting mechanism can provide financial stability and predictability, thus improving the overall management and execution of construction projects.
Ready to end the fire drill and get paid faster?
