Long term projects can be very tricky and frustrating at times for home builders or remodelers. While you are dealing with your workers, subcontractors, schedules, materials, etc., it can be a challenge to keep track of invoices and payments on the project on top of that. A way to make invoicing a little easier is to have a workflow for progress invoicing.

Let’s start with the basics.

What is progress invoicing?

Good news! You are likely doing it already! Progress invoicing is simply the function of billing customers in increments of the full estimate throughout a project until its completion. For example, let’s say you are building a $400,000 house. Since it is very unlikely that you would bill the full amount at the beginning of the project, you need processes in place to get portions of the full $400,000 throughout the project. Having the right workflow in place will keep everything working smoothly.

Benefits of progress invoicing

So, how can having the right progress invoicing workflow in place benefit you?

More Cash
You will have positive cash flow. Project costs and overhead can be covered as the project progresses because you have the system in place to know how much money you have and can budget accordingly.
Less Confusion and More Accountability
Overall, there is less confusion. Less confusion for you and your customer on payment details, which can make for an easier customer relationship. Not only does it allow you to hold your customer more accountable so they know when the payment request will happen, having it already planned out can help hold your company accountable to follow the schedule that you have set for your project.
Budget Tracking
You will be able to easily track invoices and also know when you will get paid. You will also see exactly how the project is tracking against the estimate and be able to adjust accordingly, if necessary.
Tools
There are tools in most software that make all of this happen, again with the right process in place! Find a software that offers the functionality to track progress invoicing, like QuickBooks Online.
Happy Customers
Your customers will not be shocked when they receive a bill since it has all been laid out for them already. It can also give them peace of mind that the job will be completed to satisfaction.
Happy Vendors and Subcontractors
Your vendors and subcontractors will be happy when they are being paid on time. Since they will know the expectations of the project, and you will have set terms up front, this will make working together smoother – at least from the accounting side.

Win, win, win!

Setting up progress invoicing

As we’ve already hit on, one of the most important things to do so that progress invoicing works for you is to establish and agree upon the billing details ahead of time, ideally when you are setting up the contract. That way everyone is clear what is expected and can plan accordingly. Be sure to include:

Total amount of the contract
When you will be invoicing
How much you will be invoicing

When?

To determine when you will be invoicing may depend on your relationship with your client. Examples of choosing a time to invoice would be completion of certain phases of the job, monthly on a chosen day of the month, or a chosen time frame agreed upon by both parties. But remember, be confident in you setting your billing terms and do what works for your business, whether it’s Net 30, on the 5th of the month or when a discipline is completed.

How Much?

There are several options to consider when deciding how much of the total estimate to bill. This could be a percentage of the total estimate or a percentage of cost code lines from your estimate. You can even do a custom dollar amount of the total estimate. Another way to determine an amount to bill is to go to your project budget, add up all of the costs and work performed for the month, calculate your fee and charge that amount.

Again, the biggest key to making this work is to make sure you and your customer agree upon the details before the project begins and having the right workflow in place ahead of time.

It’s time to bill! Now what?

When it comes time to billing, QuickBooks has the functions to set up progress invoicing and works with your project management software, such as Co-Construct or BuilderTrend. It provides reporting and dashboards so you can easily track the status of the project. 24hr Bookkeeper has created a step-by-step video on how to do the function of progress invoicing in QuickBooks and has the expertise to take the functions and design a workflow that works for your situation.

At 24hr Bookkeeper, we are passionate about working with businesses like yours to take them to the next level. Getting workflows and processes in place that work for your company, utilizing your software will save you time, money and headaches. Our team knows the challenges you face as a construction business owner and can help solve your accounting and bookkeeping problems.

Find out more how our services can help take your business to the next level!