Unlike the majority of industries where invoices are typically one-page documents that detail services provided or items purchased, construction invoicing is an extensive procedure. It is carried out on a monthly basis and includes many detailed documents and backup information. For both contractors and subcontractors, it is vital that a positive cash flow is kept. Therefore, invoicing must be kept as a top priority on construction projects. Having an adequate invoicing process and payment infrastructure will go a long way in helping to keep the cash coming in and minimize potential disputes that could arise due to lack of documentation...
A construction invoice or payment application provides an account of the work completed and materials provided through a certain time period – typically a month. It follows the work required by the contract, including any change orders, to determine the amount due. Supporting information is also usually required. Create a contractor invoice sample with the information below.
The standard invoice template follows AIA Document G702 for contractors and G702S for subcontractors and contains the following:
Supporting documentation typically, include but are not limited to: the schedule of values, lower-tier subcontractor invoices, and lien waivers.
Most construction contracts between contractors and their subs are based on a Pay-When-Paid term – meaning that the contractor will pay the subcontractor after receiving payment from the client for the respective invoice. Typically, the contract also gives the contractor a duration of 30 days to process the payment after receiving it from the client. This means that subcontractors wait an average of approximately 83 days to receive payment for their services, according to a recent study by PWC.
Payments for construction invoices have been historically processed using paper checks; that process has always encountered issues due to manual errors in writing the checks or having checks be lost in the mail.
With the advancement in technology and payment infrastructure, many companies are now opting to use electronic payment methods, such as wire transfers or ACH payments. Wire transfers are relatively expensive and incur fees on both the sender and receiver; thus, the preferred option for most businesses has been to establish ACH payment infrastructure. There are various benefits to using ACH payments, such as: speed, security, and cost. But it usually requires upfront coordination for exchanging bank account details.
Also, ACH transfers are typically disconnected from the accounting tools used in construction. Therefore, contractors would still have to manually match their invoices to their Accounts Payables and subcontractors would still manually check their bank accounts to verify their Accounts Receivables.
This disjointed process can become particularly cumbersome for larger subcontractors and contractors as they work on multiple projects in parallel – and that’s where state-of-the-art A/R and A/P tools have tried to capture these flows. As of the date of this article publishing, only ConstraforPayTM goes the extra mile to connect these payments and accounting ledgers to the corresponding projects, and does so without requiring subcontractors and contractors to exchange their routing and account numbers beforehand.
With ConstraforPay, you can set up your account and send/receive payments in minutes!
Constrafor’s payment portal allows you to set up your account, authenticate with your bank, and send or receive payments – all under 10 minutes!
Our product encompasses the full construction invoicing lifecycle and is used by both contractors and subcontractors. Start by uploading an invoice, going through the approval process, and then processing payments. You can also view all your invoices and payments in our simple and interactive dashboards. ConstraforPay also integrates with your existing ERP accounting system, allowing your books to always be up to date!
Please contact email@example.com to inquire about our pricing or check our standard packages and get started with our free trial.
Many construction professionals get frustrated when it comes to invoicing, and can’t wait to get done with it so they can be back in the field to do what they do best. By keeping updated on the latest innovations in invoice and payment management, industry members can speed up payments and avoid costly disputes. To learn more, subscribe to our blog and learn more about How to get paid faster as a Subcontractor and the Advantages of establishing an early payment system for Contractors.
As always, Constrafor remains free to use for subcontractors and we will continue our mission to improve the platform with your needs top of mind. For support with our new COI tool, Please email firstname.lastname@example.org