CONSTRUCTION PAY APP TIMING OPTIMIZATION WHAT BILLING LAG ACTUALLY COSTS.
Missing a billing cut-off by one week doesn't just delay that month's payment by a week. It defers that entire billing cycle permanently for the remainder of the project. On a 6 month project with $80,000 monthly billing, one late submission costs 30 days of float on the remaining $400,000 in project billings. SPM's first engagement action is a billing cut-off audit, which typically recovers $50K to $150K in the first cycle.
Most owners read a late pay app as a one week delay, because that's how it feels. It's not. The billing rolls into next month's cycle and every cycle behind it slides with it, so the cost is 30 days of float on all the money left in the contract rather than 30 days on one draw. That's why this is a billing discipline problem and not a slow paying GC problem. The GC is paying on the same terms he always did. The invoice reached him a month later than it could have.
WHAT IT MEANS.
Billing lag is the number of days between a GC's monthly billing cut-off and the day you submit your pay application.
THE MATH ON MISSING A BILLING CYCLE, IT IS NOT JUST ONE MONTH.
The permanent deferral
When a pay app goes in one week late, it misses the GC's billing cut-off for that month, so the billing enters the following month's pay app. On a 30 day payment cycle, one late pay app defers $60K to $120K by 30 days permanently. Over a 6 month project with $80,000 monthly billing, one missed cut-off costs 30 days of float on $80,000 per cycle for the 5 remaining cycles, which is $400,000 in unnecessarily deferred cash.
The compound effect
A contractor with 6 active projects, each with a different billing cut-off, who consistently submits pay applications 5 to 10 days late is running $300,000 to $600,000 of unnecessarily deferred receivables at any given time. Every one of those GCs is paying on the terms he signed, and the only late document is yours. The correction is structural submission timing rather than an attempt to speed up somebody else's check run.
The cut-off discipline that isn't there
Discipline here means one billing cut-off date per month, with every active project submitting a pay app on or before that date. There are no exceptions for being busy, for waiting on a schedule of values revision, or for not having updated cost information. An imperfect pay app that's on time is worth more than a perfect pay app that misses the cut-off, and most subs have that ranking backwards.
WHAT IT LOOKS LIKE IN DOLLARS.
A $5M revenue contractor who reduces average billing lag from 10 days to 2 days on a 30 day payment cycle reduces average AR outstanding by $109,000 permanently. That $109,000 was already earned, it was simply not being collected efficiently. No new contract and no rate increase is involved in producing it.
SPM's first engagement action on a new client is a billing cut-off audit across the active project list. It typically recovers $50K to $150K in the first cycle, because at least one project is billing a week or more behind a cut-off nobody had written down. The recovery comes from timing alone, with no change to scope, price, or terms.
THREE STRUCTURAL CHANGES THAT ELIMINATE BILLING LAG.
Pick a date, and the 25th is common. Every project bills on the 25th: the schedule of values is updated, the pay app is put together, and the submission happens that day. Month one is uncomfortable, and by month three it's automatic.
If job cost is being entered weekly, the cost to date is current on the 25th. If job cost is being entered monthly, the 25th means rebuilding four weeks of cost history from receipts and memory, which is the single most common reason pay apps go in late. Weekly bookkeeping is a prerequisite for billing cut-off discipline rather than a separate improvement project.
Days sales outstanding, measured from pay app submission to cash received and tracked by project and by GC, tells you which GC relationships have payment cycles that need an earlier submission. A GC on a 45 day cycle needs the pay app 15 days earlier than a GC on a 30 day cycle to put cash in the bank on the same date. That's a scheduling decision you can only make once the numbers are tracked by customer.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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