Best Practices for Improved Construction Invoicing

In most industries, getting paid in a timely manner for services rendered is a general expectation of doing business. But in the construction industry, each part of billing is a single part of a complicated process. This means submitting an invoice and getting paid is not exactly a simple, straightforward action. Invoices in construction include many variables and often require a list of additional documents to validate the costs listed in the invoice. While there are many issues that slow down construction billing, a poor construction invoicing process is often a big part of the problem.

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An invoice is a document submitted by a contractor, subcontractor, or supplier to receive payment for services provided. On a large construction project, invoices are generally sent from subcontractors and suppliers to general contractors, who then bill customers for the job. Proper construction invoicing procedures help to eliminate the issues that arise from overhead costs, paperwork challenges, and lagging payments. Getting paid on time is essential to provide contractors with the ability to maintain a current project and to have the funds to research and bid on upcoming work. These tips can help you improve your construction invoicing process. You can receive payment sooner for every job and keep money flowing to invest in future projects.

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Read the Contract

It might seem simple, but many contractors and subs skim contracts and sign without really learning the important details in the document. It's no secret that construction billing comes with complications. Your contract includes information about billing and payment timelines and which forms to use for the process. General contractors and subcontractors should always have a firm understanding of the billing requirements before signing a contract.

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Document Everything

As a professional in the construction industry, you should be no stranger to documentation. Contractors and subcontractors receive payment for the work they document. Disputes that arise during payment can only be solved with stringent documentation processes. Keep all receipts and timelines created during the project to validate invoices when needed.

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Standardize Invoices

Standardized documents are one way to ensure all documentation associated with billing is professional, transparent, and easy to understand. A clear and detailed invoice makes it easy for clients to know exactly what they're paying for. While invoices and other payment documents vary from one project to the next, many details remain standard for your company. Creating a basic format with recognizable processes and terms is one way to ensure your invoices are consistently transparent for your customers. 

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If you have difficulty determining exactly how to create a professional invoice, you can download this free invoice template and customize it for your business. Your standardized invoice will provide the opportunity to include company and client information, dates of service, labor and material costs, and brief descriptions of additional charges. Professional construction invoicing tactics will help your customers understand your billing process and take it seriously.

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Submit Invoices on Time

Your customers don't have any reason to think you take invoices seriously if you don't submit them on time. Late invoices create confusion and lead to even later payments. Each subcontractor must submit invoices and supporting documentation in a timely manner for the company to send an accurate invoice to the customer.

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Begin the project with transparent communication so all subs are up-to-date on the required documents and timelines associated with the billing process. Streamlining your internal communications and billing processes can help ensure invoices quickly go out to customers.

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Improve Communication

When a general contractor bids on a project and signs a contract, subcontractors don't always know the terms. This can lead to miscommunication that stalls the billing process. For many construction professionals on every level, filling out paperwork feels like a distraction from the job (fieldwork).

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However, it's a vital part of keeping any construction business above water. Creating a constant flow of communication between general contractors, subcontractors, and office staff can help. You'll keep everyone on the same page when it's time to begin the billing process. This means your team submits the right documents on time. Then you can create accurate invoices.

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Offer Incentives for Paying Early and Penalties for Paying Late

When your clients pay their phone bill or insurance late, they get penalized or lose service. There's no reason anyone should expect construction companies to wait indefinitely for payment. Creating a clear invoice with details about when payment is due and when a late fee will be applied can help your customers prioritize your payment. If you choose to use late penalties as a tool, make sure the terms stay reasonable and don't chase customers away.

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Conversely, you could offer a discount to customers who provide payment early. This tactic helps you avoid the negativity associated with late payments and puts the ball in the customer's court. However, discounts cut into your company's profit margins, so it's vital not to go overboard with your generosity.

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Automate Construction Invoicing Followup

When your invoices don't get a response, you need to remind your customers to pay their bills. Just like any business or household, your customers have a variety of reasons payment can be delayed. Invoices can get lost in the mail, buried in a pile of other bills, or otherwise forgotten.

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A reminder that includes the payment details will provide your customers with the necessary information to complete the payment process if the original invoice is missing. When the customer is simply sitting on the invoice, reminders can serve as a motivator to speed up payment. When your billing department automates these reminders, it eliminates the extra task.

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The construction invoicing process is an important part of construction billing. You can improve it to speed up payment and eliminate billing errors. Taking these steps is just one way to help your company eliminate the slow payment issues that plague the industry. Do you want to learn more about how you can streamline your construction billing and payment process? Then get in touch with the construction billing software experts at Flashtract. Also, visit our blog for more tips about construction billing and the ways it can be improved with technology.