Underbilling happens when a contractor invoices for less than the work completed, often unintentionally. This can delay revenue collection and distort project financials, making it difficult to accurately assess the project’s cash flow and profitability.

How Underbilling Skews Project Financials

When a contractor underbills, they are effectively postponing the receipt of revenue, which can lead to cash flow shortages. Underbilling also gives a false impression of the project’s financial status, as the contractor’s accounts may not reflect the actual work progress. This can result in financial strain if unbilled costs accumulate over time.

Best Practices for Avoiding Underbilling

Contractors should regularly reconcile invoices with the project’s progress reports to ensure that they bill accurately for the work completed. Implementing project management software can help track billable milestones and prevent revenue delays. Related Terms: Invoice Reconciliation

FAQs

What causes underbilling in construction?

A: Underbilling occurs when a contractor invoices for less than the work completed, usually due to oversight or inaccurate tracking of project progress.

How can underbilling affect a construction project’s financials?

A: Underbilling delays revenue collection and gives a distorted view of the project’s cash flow, potentially leading to financial strain.

Underbilling Definition

How Underbilling Skews Project Financials

Best Practices for Avoiding Underbilling

FAQs

What causes underbilling in construction?

How can underbilling affect a construction project’s financials?

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