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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.
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Other construction terms
What are Current Assets?
Current Assets in the construction industry represent the value of all assets that can reasonably be expected to be converted into cash within one fiscal year. This includes assets such as cash on hand, accounts receivables, inventory, and other short-term investments. For construction companies, the most significant current assets are typically inventory and accounts receivables. The inventory will usually include materials, equipment for construction, and any other resource that is vital for completing projects. Accounts receivable, on the other hand, pertains to the money that the company's clients owe for the projects the company has already completed or is currently working on. Understanding the concept of current assets helps to analyze a construction company's liquidity, operational efficiency, and overall financial health.
What is Labor Burden?
Labor burden in the construction industry refers to the additional costs borne by a construction firm beyond direct wages paid to employees. It encapsulates all indirect expenses associated with employing a workforce such as benefits, workers compensation, insurance, PTO, retirement pensions, uniforms, training costs, and equipment among other employment related costs. An accurate understanding of labor burden is crucial for construction firms because it directly impacts bidding and project pricing efficiency. When effectively managed, it can improve a firm's profitability and long-term financial stability. Hence, Labor Burden is a key financial metric in the construction industry.
What is a Request for Proposal (RFP)?
A Request for Proposal (RFP) within the construction industry is a comprehensive document that outlines the specifics about a particular construction project. It's a call to bidders, helping interested contractors and construction firms understand the project details, timelines, expectations, and criteria for selecting the winning bid. An RFP in the construction industry typically includes information such as project scope, schedule, required materials, budget, and other relevant factors. It acts as a formal invitation, allowing companies to bid on the project by proposing a plan that meets or exceeds the listed requirements. This inherently ensures competition, dedication towards the job and best value for money for the project owner.
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