Construction Invoicing Basics
Invoice Template Essentials
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:
- Project name
- Client name
- Invoice number
- The time duration corresponding to the provided services and/or materials
- Contract amount and change order amount(s) if applicable
- Total value of work completed to date
- Total amount of previous payments
- Current amount due
- Total balance remaining
Supporting documentation typically, include but are not limited to: the schedule of values, lower-tier subcontractor invoices, and lien waivers.
- Subcontractor submits to the contractor an invoice for work performed for the previous month (for example: the invoice is submitted on December 5th for work completed in the month of November).
- Contractor reviews the invoice for accuracy and verifies that the invoice amount corresponds to the value of work performed by the subcontractor.
- Contractor approves the invoice and the workflow moves to the payment process.
- After receiving payment from the client, the contractor will process payment to the subcontractor.
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 Payment Product
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!
To learn more about how Constrafor can improve your construction back-office, schedule time with an expert here.