OVERBILLING AND UNDERBILLING, EXPLAINED.
Overbilling means you've billed more than the percentage of work complete on a job, and underbilling means the opposite: more work is complete than has been billed. Both appear on the WIP schedule, underbilling as costs and estimated earnings in excess of billings, and overbilling as billings in excess of costs and estimated earnings. Both carry real risk if they're left uncorrected.
The two positions are mirror images of one job tracking problem. Somewhere between the field and the billing office, the pace of invoicing stopped matching the pace of production. When invoicing runs ahead, the company spends money it collected for work nobody has performed yet. When invoicing runs behind, the company funds finished work out of its own pocket while waiting on itself. Either way, the WIP schedule is the only report that puts the two side by side per job, which is why a monthly WIP review catches both while a monthly AR aging catches neither.
WHAT IT MEANS.
Overbilling is billing more than the percentage of work complete on a job, and underbilling is the reverse, where more work is complete than has been billed.
Overbilling and underbilling sound like opposite problems, and mechanically they are, but both come from the same underlying issue: billing and job progress have drifted apart. Overbilling means cash came in ahead of the work that earned it, which feels fine until the job's real cost to complete comes in higher than expected and that advance cash is already spent. Underbilling means work is sitting unbilled, which starves cash flow on a job that might otherwise be perfectly healthy. Neither one is a disaster by itself, but both need to be caught and understood rather than just reported.
Overbilling occurs when the amount billed on a job exceeds the percentage of work complete, measured by cost incurred against total estimated cost. On the balance sheet it reads as billings in excess of costs and estimated earnings, a liability standing for cash you collected for work you haven't performed. A moderate and consistent level of overbilling isn't automatically a red flag, because some billing structures are built to front load a little. The concern is overbilling that's large, growing, or concentrated on jobs where the cost to complete is uncertain, since that combination means the cash cushion can disappear fast if costs run over.
Underbilling runs the other direction. Work performed exceeds what has been billed, and it reads on the balance sheet as costs and estimated earnings in excess of billings, an asset standing for earned but uncollected revenue. Underbilling is usually less dangerous than heavy overbilling, but it still starves cash flow, because the company is financing completed work with its own capital until billing catches up. Chronic underbilling across a job portfolio is one of the more common and more fixable causes of cash flow strain we find.
WHERE IT GOES WRONG.
Reading overbilling as being ahead
The belief is that billing ahead of the work means the company is ahead financially. Overbilling means cash came in ahead of work performed, which is fine when the cost to complete estimate is accurate and risky when the job's real cost comes in higher than expected. If that advance cash has already been spent elsewhere, there's nothing left in the job to absorb the overrun.
Calling underbilling a timing issue
The belief is that underbilling is only timing and will sort itself out. It does sort itself out eventually, but in the meantime it's starving cash flow on jobs that might otherwise be healthy. Chronic underbilling across a portfolio compounds into a real cash problem well before anybody calls it one.
Watching the AR total instead of the WIP schedule
The belief is that a healthy looking AR total means the WIP position is fine. A healthy looking AR total can hide significant overbilling or underbilling at the individual job level. That job by job view is what the WIP schedule is built to reveal, and it's the one thing a single AR total can never tell you.
GETTING BILLING BACK IN LINE.
Correcting overbilling means either slowing the billing pace so job progress catches up, or confirming the cost to complete estimate is accurate so the overbilled position is deliberate and understood rather than accidental. Both of those are acceptable answers. What isn't acceptable is running the job without knowing which one you're looking at.
Correcting underbilling means billing more promptly and completely for work already performed, catching change orders that were completed but never invoiced, and tightening the billing cycle so finished work doesn't sit unbilled for an extra cycle. Most of the money in an underbilled position isn't disputed by anyone. It simply hasn't been invoiced yet.
THE OUTPUTS, NAMED.
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.
| 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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