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Construction Accounts Receivable

Accounts receivable software tracks amounts owed by customers for products and services provided on credit and is used for monitoring effective cash management. The amount of cash collected for a job as compared to cash disbursed is an important component of measuring the financial health of an ongoing job. Progress bills for jobs in process affect accounts receivable. Accounts receivable is sometimes called “trades receivable” and is considered part of current assets. The total of Cash and Accounts receivable compared to Accounts Payable measure the liquidity of a business which is the ability to pay ongoing liabilities on a timely basis.

Time & Materials Billing
Time and Materials work can be time consuming. Often times, the billings go out late because the T&M process – recording, costing, pricing and billing – takes longer than it should.

Time and materials applied to a job is money invested that you want to recoup as quickly as possible. The key to speeding up T&M cash flow is how quickly and efficiently you can record the time and materials used, then pricing it and invoicing the customer.

You will want an efficient way of capturing time, whether it is in the office or in the field at minimum daily This can be done through specialized spreadsheets, direct enter to the web or using a thin client PC in the field connected to the server. You may also be able to employ a handheld device in some cases to capture time or material usage. Fewer manual steps , which require hand written entries by field personnel, will result in less errors to slow down the billing process. It will also facilitate catching inventory shortages more quickly.

Once all time and materials is recorded you will want to review the potential billings and see if any adjustments or additions need to be made prior to invoicing. This should involve an approval process by field personnel which will require some kind of electronic approval capability. In larger contractors this may involve not only company people but subcontractors and purchasing managers.

Prior to billing, you will want to look at the project job profit to date by reviewing all costs, charges and profits for the job. This can be used to trap inaccurate entries and insure you r profit expectations are on track.

Invoice format
Professionals service time and billing is an area which can differ between companies depending on customer demands. You want the ability to show only the necessary amount of detail on the invoice in a simple to understand format. Some contractors have customers that require they follow a custom invoice format, otherwise they won’t get paid. You also will want to have the ability to reprint any prior invoice as required, something not all systems can do once the invoice is posted.

AIA Billing
Using your schedule of values for the job, you want the ability to select the date range of work performed to create the G702 and G703 applications for payment and creates the accounts receivable invoice. The program should bring forward Budgets and change orders into the AIA billing screen.

Current and prior period amounts are adjusted as necessary by the program. You will also want the ability to reverse the applications, redo and reprint them.

Other questions you should ask yourself and prospective vendors when evaluating Accounts Receivable

Sales Tax
Determine if you need to charge sales tax. Different states have different levels of complexity of sales tax.

How do I track sales tax collected from customers? Can I determine my sales tax liability on a cash and/or accrual basis? Can the system handle different sales tax rates by customer? Is it possible to charge sales tax on the material component of a job, but not on the labor component? How does sales tax work with contract management?

Time card collection
Determine how the software collects time information. See if the system includes or integrates with a time-keeping system, either in-house or on-line.

How is the information in the time card entered? Does the system have the ability to collect time information on-line? Does it integrate with a time-clock or web based timecard for real time cost reporting?

Determine the type of invoicing you need to create. Review the software to see how to create those invoices. Review the different options of A/R invoices, including T&M, Cost Plus, Progress Billing, Loan Draws, Milestone Billing, Unitary Billing, depending on your specific invoicing needs. Review the process for creating these invoices. Be sure to ask about the process of modifying or voiding and re-creating existing invoices.

Progress Billing
How do Progress Billings integrate with job costing, with change orders, and with contract management? How does the system handle modifications or voided Progress Billings? How does the system create T&M invoicing? How does the system void T&M invoices to re-create or revise? How does the system handle recurring invoicing? How does the software track service invoicing? Ask to see the steps involved with creating, modifying and/or voiding an invoice, including Progress Billings, T&M invoices, or other invoices.

For comparisons of different construction software products, download the free Construction Software Selection Kit.

Review by | Construction Software