As a subcontractor, getting paid consistently on time is crucial for your company's cash flow. But it's easy to make construction invoicing mistakes in the billing process, especially if you don't have the right software and certified accounting experts. Even if you do, it still requires substantial resources and money to keep everything in order as well as ensure work is performed where it counts - on the jobsite.
Understandably, it's challenging to establish a streamlined invoicing process when you have to rely on manual processes, multiple client requests, and be on-time to pay bills. There's a better way to help the back-office streamline its processes.
By recognizing the following construction invoicing mistakes, you'll be more efficient in your billing approach, which can help save time and money.
1. Construction invoices with inconsistent formats
When drafting construction invoices, you want to come across as professional, organized, accurate, and consistent. Therefore, all invoices should have a standard format. Otherwise, you risk confusing customers and making it tough to analyze invoices if you ever have to return to them in the future.
Invoices are often at risk of becoming inconsistent when subcontractors deal with varying complicated tasks or if multiple personnel is approaching the construction invoicing process differently. Establishing a template can help address this issue. Additionally, before sending out invoices, review them carefully for things like typos and incorrect figures.
2. Late submittals
Life on the job site gets busy, but do your best to avoid late invoice submittals. Billing may sometimes seem like an arduous task, but it needs to be done to get paid. Try to choose a specific day of the week on which you will send out all invoices so that you can track payment trends and follow-ups. In addition, having a mobile app that connects the field with the office can ensure submittals, materials ordered/delivered are accounted for to get paid or make payment.
3. No or manual follow-ups
If you don't follow up on pending invoices, it can hurt your construction business. But, of course, your customers can get busy just like you, so sometimes they need a friendly reminder from you. So be sure to have a follow-up procedure (e.g., software providing alerts and notifications based on status) in place so you can maintain a healthy cash flow.
4. Construction invoices with incorrect data
Sometimes construction invoices feature erroneous information. So again, whether a figure is off, the invoice reflects a wrong percentage of work completed, or something similar, it's essential to review the invoice thoroughly before sending it out.
5. Unfamiliarity with terms and conditions
To avoid discrepancies, it's crucial to fully understand and bill within the parameters of any terms and conditions established upfront between you and the customer. This involves setting clear payment timelines. Make sure you have researched your client ahead of time as well.
6. Client blindness during billing processes
It can sometimes be helpful to understand the billing and scheduling process of each client. For example, they might utilize a specific payment method or make payments at different times than most other customers. The best way to avoid these types of misunderstandings is to create contractual agreements with your clients and suppliers.
7. Missing details and confusing itemization
Leaving out certain information can complicate invoices and make it harder for customers to pay you. Invoices should include the following information:
- Invoice number and date
- Customer's address
- Your address
- Logical and consistent itemization of services
- Due date and payment methods
- Terms and conditions
Note that itemizing too much or too little is one of the most common construction invoicing mistakes subcontractors make. Having paper-based or email workflows also causes invoices to also get lost. It's essential to provide just enough information for your customers to know what they're paying for and have a digital platform that tracks the entire process. These two crucial items help construction firms avoid unexplained fees and misunderstandings.
Avoid billing mistakes with professional subcontractor technology
To maintain cash flow and credibility for your business, be sure to avoid the errors mentioned above. And, let easy-to-use construction software automate your invoicing, PO, and billing workflows for clients and vendor management. By doing so, you'll be more likely to get repeat business and referrals while also saving time and money.
