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Progress Billing
What is Progress Billing?
Progress Billing is a method commonly used in the construction industry, where billing for a project is done at different stages as it progresses, rather than asking for full payment upfront or at the completion of the project. This type of billing is beneficial both for constructors and clients. For constructors, it helps maintain the cash flow required for the ongoing expense of materials and labor. For clients, it provides assurance that they are paying for the work only as it is being completed and allows them to budget effectively. Each invoice is usually based on the percentage of work completed, thus it is also known as percentage-of-completion billing method. Proper documentation, like progress reports or photos of the construction site, often accompany these invoices as a proof of progress.
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Other construction terms
What is a Backlog?
A Backlog in the construction industry refers to the accumulation of work orders or tasks that are yet to be completed. It is often utilized as an indicator of the volume of work that needs to be addressed. Within a construction context, a backlog could include pending blueprints to approve, inspections to perform, or specific construction tasks to complete. It is crucial for project managers to monitor and manage the backlog because it can directly impact project timelines, productivity, and ultimately, profitability. A high backlog suggests a heavy workload and the potential for delay. A low backlog may indicate that there is not enough work to keep the crew busy. Therefore, balancing the backlog is key in efficient project administration.
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 are Preliminary Notices?
Preliminary Notices are legal documents that are commonly used in the construction industry. These notices are also known as pre-lien notices or notices to owner. They are typically sent at the beginning of a construction project by the subcontractors, suppliers, or equipment renters, essentially anyone who does not have a direct contractual relationship with the property owner. The main purpose of these notices is to inform the property owner, general contractors, or other party with financial interest in the property, of the sender's involvement in the project and their right to file a lien in the event they are not paid for the services or materials provided. It's an essential step in securing one's right to payment. Moreover, Preliminary Notices serve as a professional way to maintain transparency and communication in construction projects and promote smoother and more prompt payments.
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