Underbillings
What is Underbilling?
Underbilling refers to a scenario in the construction industry where the actual costs incurred on a project surpass the billed amount for a specific time period. Often occurring unintentionally due to unexpected cost variations, it results in a deficit situation for the contractor. It is essentially an imbalance where the contractor has delivered more work or materials than they have billed the client for. Underbilling can strain cash flow and disrupt project schedules if not addressed promptly. While this might prove beneficial to the client in the short term, contractors need to ensure that they identify and rectify underbilling to maintain project profitability and financial stability.
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Other construction terms
What is a Voluntary Document?
A Voluntary Document in the construction industry refers to a document that is not legally mandated but is often used to provide guidelines or recommendations to improve performance or efficiency in the construction process. These documents can serve various purposes such as setting industry standards, outlining best practices, facilitating coordination between different project stakeholders, or promoting sustainability. Examples of voluntary documents in the construction industry include technical specifications, quality guidelines, safety protocols, environmental guidelines, or even design criteria. While these documents are not legally binding, they often influence construction operations due to their direct impact on project quality, safety, and cost-effectiveness.
What is a Prime Contractor?
A prime contractor, also commonly referred to as a general contractor, is the main contractor responsible for managing an entire construction project. They are in direct contact with the build鈥檚 owner/developer and hold primary responsibility for the construction, execution, quality, and completion of the project under the agreed terms and schedules. As such, the prime contractor addresses concerns and resolves issues related to the project, contributing to the effective execution and timely delivery. The prime contractor also manages the procurement of materials, labor, and equipment, ensuring compliance with building codes and regulations.
A critical part of the prime contractor鈥檚 job is hiring and managing trade contractors, also known as subcontractors, who specialize in specific construction trades like electrical, plumbing, framing, etc. The prime contractor essentially acts as a hub, contracting out portions of the work to skilled trade contractors while retaining overall control of the project operations.
Prime contractors have a vested interest in working with subcontractors who not only are highly skilled in their respective trades but also have efficient, well-defined operational and financial workflows to ensure reliability and consistency in their performance. Streamlined billing processes are crucial in this regard. When subcontractors can quickly and accurately generate pay applications鈥攃omplete with the necessary compliance documentation and lien waivers鈥攊t allows the prime contractor to bill the project鈥檚 owner promptly and get paid faster. Delays in subcontractor billing can significantly impede the prime contractor鈥檚 ability to get paid in time, thereby causing delays in payments to other contractors, too.聽
This is where a solution like Siteline can ultimately benefit prime contractors by helping their subcontractors streamline billing processes. Siteline accelerates subcontractor billing by automatically generating pay apps per prime contractor specifications, tracking compliance requirements, managing change orders and lien waivers, and providing payment visibility. When subcontractors use Siteline to automate billing, prime contractors receive accurate, compliant pay applications faster, allowing them to bill project owners promptly and get paid quicker as a result.
See how Siteline can accelerate your construction billing cycle and get you paid faster by scheduling a demo today.
What is a Prevailing Wage?
A Prevailing Wage refers to the hourly rate, benefits and overtime, paid to the majority of workers, laborers, and mechanics within a particular area. In the construction industry, it's the standard wage contractors and subcontractors must pay their workers when working on government projects. It's derived from the Davis-Bacon Act of 1931 which mandates that workers on federal construction projects must be paid at least the prevailing wages in the local area. The goal is to maintain fairness and prevent undercutting of wages. It includes various types of construction jobs from carpentry, electricians, ironworkers to bricklayers. The rate differs from location to location and job to job.