What is Self-perform?

A unit price contract is a widely used pricing model in the construction industry where general contractors (GCs) provide a fixed price for each unit of work and material (based on the anticipated quantities specified by the client). The final contract amount is calculated by multiplying the pre-agree unit prices by the actual quantities used or work performed.

This approach allows for flexibility as the total costs adjust to reflect actual usage. Therefore, unit price contracts are ideal for projects with uncertain material and work quantities, helping avoid cost overruns due to miscalculations.

For subcontractors, there are specific considerations when working with unit price contracts. It’s crucial to ensure precise unit price calculations to maintain profitability and implement sound systems for tracking and reporting actual quantities. Clear communication with the GC about quantity changes is also important, and subcontractors should be prepared to justify any discrepancies that may occur.

Siteline—an intuitive A/R management system—simplifies unit price billing for subcontractors, allowing them to:

• Easily input and update unit prices;
• Automatically calculate billing amounts based on reported quantities; and
• Generate accurate, detailed pay applications that show up-to-date unit prices and quantities.

Ready to optimize your unit price billing process? Contact Siteline today to learn how our solution enhances A/R workflows to accelerate payments.

Generally Accepted Accounting Principles (GAAP) are a set of standardized rules and procedures in accounting to provide consistency in financial reporting across different entities. In the construction industry, GAAP are of particular importance due to the unique nature of accounting involved. For instance, consideration of revenue recognition when recognizing costs for long-term projects is guided by GAAP. Under GAAP, the percentage of completion method is commonly used, allowing companies to report income as the work progresses, thus providing a more accurate view of the financial health of a construction company. Similarly, fixed asset accounting, inventory valuation, recognition of liabilities, and depreciation methods are all guided by GAAP in the construction industry. By adhering to GAAP, the construction industry ensures transparency, consistency, and comparability in its financial information, promoting investor confidence and informed decision-making.

Overbilling (or billing in excess of costs) occurs 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.