In Plain English
Quick Answer
The process of submitting invoices to the owner each month for work completed and materials stored.
Definition
Definition
In construction, billing refers to the process of submitting periodic payment applications to the owner for work completed and materials stored during the billing period. Contractors submit billings monthly, typically using AIA G702/G703 forms or owner-specified formats, supported by a schedule of values, lien waivers, and certified payroll where required. Timely and accurate billing is critical to maintaining positive cash flow.
Context
Why It Matters in Bidding
Billing accuracy directly governs a contractor's cash position, because the schedule of values created during bidding becomes the line-item basis for every monthly payment application. Owners and lenders scrutinize billings against percent-complete, and errors trigger rejected pay apps that delay funds for weeks. Disciplined billing also preserves lien rights and keeps subcontractor payments flowing.
Example
Example
On a $4.2M school renovation, the GC submitted its June billing on AIA G702/G703 showing 38% complete against the schedule of values, attached conditional lien waivers, and was paid within the contract's 30-day window.
See Also
Related Terms
Resources
Related Tools & Templates
FAQ
Questions Contractors Ask
How is a construction billing amount calculated each month?
Each schedule-of-values line is multiplied by its percent complete for the period, stored materials are added, and previously billed amounts are subtracted. Retention, often 5 to 10 percent, is then withheld. The net total becomes the current payment due, summarized on the G702 continuation sheet and certified by the architect.
What documents must accompany a payment billing?
Owners typically require a schedule of values, lien waivers from the contractor and lower-tier subs, and on public work certified payroll. Some contracts also demand updated progress photos, stored-material invoices, and a revised schedule. Missing any required backup is the most common reason a billing is rejected and payment slips a cycle.
What is the difference between overbilling and underbilling?
Overbilling means a contractor has invoiced more than the value of work actually performed, borrowing future cash today. Underbilling is the reverse and signals work financed out of pocket. Both distort work-in-progress reports, and persistent overbilling can leave a project unable to fund remaining costs near completion.
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