Progress Billings in Construction
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
Just like a tip of an iceberg, a progress billing for a construction project is an invoice for a small part of the overall contract value. It needs to be recorded correctly and presented to management in a way that is understandable and beneficial for making decisions. This article will introduce the concept and cover how progress billings are presented on the balance sheet.
In addition, I’ll explain its importance related to either the completed contract or percentage of completion method. Furthermore, I’m going to explain how this is done with QuickBooks as many small business contractors use QuickBooks as their accounting software.
Introduction to the Concept of Progress Billings
In a traditional business relationship the customer purchases a service or product and the seller immediately invoices the customer for the total value of the service or product. Well, that works well with lesser expensive items. But what happens when the particular item gets into the several thousands of dollars or as in residential construction/remodeling tens or 100’s of thousands of dollars? The contractor doesn’t have that kind of capital to front for a project. To alleviate this capital intensive burden, contractors progress bill for their services.
© 2015 – 2022, David J Hoare MSA. All rights reserved.