A construction firm should price the job in writing, order materials with purchase orders and bill in stages as work progresses. The main documents are the estimate, quote, purchase order and work order.
Documents construction businesses use
- Estimate or quote. Give the client a written price before work starts. Use a quote for a fixed scope and an estimate when site conditions are unknown.
- Purchase order. Send it to suppliers for lumber, concrete, fixtures and equipment. Put the job site and delivery date in Notes.
- Work order. Use it to authorize each phase or subcontractor task. It records scope, price and a target date.
- Invoice. Bill each stage using the invoice generator, with one line per milestone.
How billing usually works
Construction rarely bills once at the end. Cash flows out early for labor and materials, so firms bill during the job.
- Progress billing. Invoice stages such as foundation, framing and finishing. Read the guide on progress invoicing.
- Deposit. Collect an upfront amount to cover materials. See invoice deposits.
- Retainage. Some contracts hold back part of each payment until completion. Rules vary, so check your contract and local requirements.
- Change orders. Extra work gets its own written approval and its own invoice line.
- Time and materials. Bill labor hours and material cost, sometimes with a markup.
The generators have no built-in percent-complete or retainage fields. Show those figures in the line descriptions and Notes, for example "Framing, 40% of contract".
Common invoicing mistakes
- Starting work without a signed estimate or quote.
- Doing extra work on a verbal request, then arguing over the price.
- Billing the whole job at the end and carrying costs for months.
- Missing the due date. Work it out with the invoice due date calculator.
- Having no late-fee policy in the contract. See invoice late fees.
- Losing track of which supplier order belongs to which job.
Useful calculators and guides
- Contractor invoice calculator to total labor and materials.
- Business days calculator to plan delivery and payment dates.
- Late payment fee calculator to price a late balance.
- Invoice due date calculator to set net terms.
Guides: estimate to paid invoice, work orders and setting payment terms.
Frequently asked questions
- How do I invoice progress payments?
- Split the contract price into stages or percent complete. Invoice each stage when it is reached or on a set date. Show the contract total, the amount billed to date and the amount due now in the line descriptions.
- What is retainage?
- Retainage is a share of each payment that the client holds back until the job is complete. Whether it applies, and its limits, depend on your contract and local law. Check with an adviser or your trade body.
- How do I handle change orders?
- Document each change in writing before you do the work. Give it a price and get approval. Then list it as its own line on the next invoice, with a reference to the change.
- Should I send an estimate or a quote?
- Send a quote when the scope is fixed and you can commit to a price. Send an estimate when conditions may change on site. State clearly which one it is.
- What payment terms are normal in construction?
- Net 30 is common, and some clients ask for longer terms. Agree terms in the contract. Write the due date on every invoice and the late-fee rule if you have one.