By Claire Wilson, Siteline

For subcontractor accounting teams, there are few tasks as fraught with potential pitfalls as progress billing. What should be a well-orchestrated process to keep money flowing has become an arduous cycle of paperwork, customized forms, disparate payment portals, and a never-ending string of missing information.

However, recent innovations in construction technology aim to bring new efficiencies to payment workflows. This article will explain the advantages of using progress billing software and share the signs that indicate your company could benefit from it.

Why is progress billing so challenging?

At its core, the fundamental concept of progress billing is straightforward—subcontractors submit periodic payment applications for complete work, and general contractors (GCs) release funds accordingly. In reality, though, the process is full of hurdles that can turn this regular task into a constant source of frustration, inefficiency, and payment delays. These include:

• Lack of Standardization: Many GCs opt not to use the standard AIA billing forms as they cost around $1,600 a year. Instead, they create custom versions with custom requirements, resulting in thousands of unique progress billing form iterations. Subcontractors must navigate this maze of differing forms, often having to learn and adapt to new formats for each project. If you accidentally use the wrong form, you can bet the GC will kick it back to you for revisions.
• Overemphasis on Owners’ Needs: Progress billing was designed with project owners in mind—and with little consideration for other project stakeholders’ workflows (ahem, subcontractors). As such, owners control the forms, billing schedules, and submission processes, leaving subcontractors with little flexibility or room to provide input.
• Complex Documentation Requirements: Each progress pay application requires other documentation, including detailed breakdowns of completed work, material costs, lien waivers (from you and your downstream vendors), compliance forms, and backup materials. Any mistakes on the billing forms, missed deadlines, or incomplete documentation can lead to the pay app being rejected, delaying your payment even further.
• Disconnected from Accounting Software: While accounting software can handle many accounts receivable (A/R) processes, they’re not equipped to support the intricacies of progress billing. For instance, most accounting systems can’t accommodate the multitude of custom GC forms nor do they integrate with the submission portals GCs require, thereby forcing subcontractors to manage a significant portion of the process manually.

What are the advantages of progress billing software?

In recent years, construction companies have become more open to embracing software that will solve their most urgent, labor-intensive problems. Enter progress billing software, a specialized tool designed to alleviate the many headaches subcontractor accounting teams face when it comes to payment applications.

With progress billing software, subcontractors can:

• Generate payment applications significantly faster by automating custom form population and calculations
• Reduce time to payment by eliminating manual data entry and minimizing errors that can lead to rejections
• Streamline billing workflows by centralizing all project documentation and providing clear visibility into billing statuses and deadlines
• Automate form management by storing and seamlessly populating custom GC forms with project data
• Set reminders for progress payment schedules to ensure deadlines are met
• Synchronize field teams and the back office by providing real-time visibility into all A/R data, enhancing collaboration to streamline pay app generation
• Optimize operations by analyzing billing data to identify potential bottlenecks and make informed decisions

For subcontractor accounting teams juggling multiple projects across various clients each month, progress billing software represents a new way to regain control over a convoluted, high-stakes process.

Is progress billing software right for your business?

There’s no universal solution that works for every company—software included. Progress billing software may not be necessary if you run a small contracting firm handling just one or two projects at a time. However, if you manage payments for multiple projects monthly, it can be a game-changer, helping centralize information impacting your cash flow to prevent errors and accelerate payments.

To determine if a progress billing tool could benefit your organization, ask yourself and your team these nine questions:

1. Are progress billing forms a total time drain?

Whether it’s the standard G702 and G703 forms or a GC’s custom version, manually completing progress billing forms can be incredibly time-consuming. And naturally, the more projects your company juggles, the more forms you must complete. It’s an endless cycle of paperwork that hinders productivity.

2. Do more than one of your GCs use custom forms?

As mentioned, many GCs create their own billing forms to avoid paying for the standard AIA documents. While the requirements of their custom forms often align with those of AIA’s, there’s no way to pull custom forms directly into your accounting software. Consequently, editing the PDFs and Excel worksheets falls to you and your team, adding an extra layer of work on top of an already arduous process.

3. Are you managing pay apps in spreadsheets?

Even if your accounting software includes standard AIA billing forms, you’re likely managing part of the process—most likely managing invoice statuses and/or collecting SOV information from PMs—in spreadsheets. This approach carries the same risks as a fully manual workflow outside your ERP, making it easy to miscalculate, break formulas, forget retention billing, miss supporting documents, or overlook payment draws.

4. Do you struggle to remember billing due dates?

With every GC enforcing its own billing schedule, it’s nearly impossible to remember what’s due and when. (Your ERP certainly does not track that information for you.) And as you’re well aware, missing a due date means missing out on that entire pay cycle.

5. Are rejected pay apps a recurring headache?

Payment applications must be flawless. If your math is off, you use the wrong form, omit supporting documents, or the GC thinks you’ve overbilled, they’ll reject the application. This rejection often occurs mere hours before the deadline, forcing you into a frantic race against the clock to rectify the issues and resubmit the invoice before risking payment delays.

6. Do the GCs you work with use different submission portals?

Unlike most industries where you simply email invoices, subcontractors are subject to a more elaborate submission process. They must follow each GC’s unique instructions about whether to email, fax, mail, or submit applications via payment portals like Textura or GCPay. As it stands, ERPs rarely integrate with these portals, creating more logins to track, systems to learn, and processes to manage,

7. Is your project billing documentation decentralized?

Regardless of the company, file management is always a challenge. Some team members diligently upload documents to the shared drive, while others continuously save important files locally with no standard approach to version control. This disjointed approach to managing progress billing forms is a recipe for disaster, making it extremely difficult to locate the most up-to-date and accurate information when you need it.

8. Do breakdowns in field-to-office communication hinder your billing process?

One of the biggest bottlenecks in the progress billing process is the back-and-forth between the back office and field teams. The accounting staff must prepare the billing sheets, share them with the project managers for input, follow up (often numerous times) for completion, and then reassemble them based on the field’s feedback before submitting. This disjointed and outdated process often results in miscommunication, lost information, and delays on both sides.

9. Are you collecting lien waivers before payment?

AIA billing forms aren’t the only required documents for progress billing. Each time you submit a pay application, you must also submit the appropriate lien waivers for your company and any lower-tier subs or vendors. As you can imagine (or have likely experienced), this collection process can quickly become convoluted if you’re collecting documents from many companies.

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If your answer is “yes” to some or most of these questions, it’s time to explore a software solution developed to alleviate progress billing pain. With the right technology, you can streamline operations, reduce errors, and ensure your team gets paid on time and in full. After all, you’ve put in the sweat equity—it’s time to reap the well-deserved rewards without any unnecessary hassle.

About the Author:

Claire Wilson is Head of Construction Solutions at Siteline, the only pay app and lien waiver management software for trade contractors. Previously, Claire was a project manager at Tishman Construction in New York City where she worked on monumental projects including Hudson Yards and JP Morgan’s Corporate Headquarters. She has a BS in Civil Engineering from Bucknell University and now serves on the board of the Bay Area Subcontractors Association (BASA).