Invoice checks for construction companies

Invoice checks for a construction company mean confirming, project by project, that everything the contract and the work on site allow you to invoice has actually been invoiced: every stage payment at the right moment, every approved variation, every provisional sum adjustment, and every hour and every item of material on day works. To do that you compare three sources: what was agreed (contract and variation orders), what was done (progress, job sheets, purchasing) and what was invoiced. Anything that appears in the first two and not in the third is a finding.

So this is not about whether an invoice adds up. Your accounting software takes care of that. It is about whether an invoice is missing. Why that happens so often in construction is covered in revenue leakage in construction.

The three sources you put side by side

Every invoice check in construction comes down to the same triangle.

What was agreed. The building contract with the contract sum, the stage payment schedule, the provisional sums, the price adjustment clause and the payment terms. On top of that, every variation order and every omission agreed during the project.

What was done. Progress per section or milestone, the job sheets for day works, the hours from the time registration, the purchase invoices for materials and subcontractors, and the plant deployed.

What was invoiced. The stage invoices, the variation invoices, the final account and any credit notes.

In many construction companies these three live in different systems, managed by different people. The contract sits in the project folder, progress with the site manager, hours in a timesheet app, purchasing and invoices in the finance system. Checking means someone brings them together.

What do you check, item by item?

Stage payments

The question is not only whether every stage has been invoiced, but whether it was invoiced on time. For each project, put the payment schedule next to actual progress. Has a milestone been reached? Did the invoice follow within a week? A stage invoice that goes out a month late does not cost revenue, but it does cost cash, and on a large project that is a substantial amount of work you are pre-financing.

Also watch stages invoiced on a percentage of completion. That percentage is often estimated cautiously, which is understandable, but estimating too low as a matter of habit pushes revenue back and makes the final account larger and more exposed.

Variations

This is usually where the largest amount sits. Keep one list of all variations per project, and record for each line:

1. Date and description.
2. Who gave the instruction, and how (signed form, email, site meeting minutes).
3. The approved amount, or for day works the number of hours and the materials.
4. The invoice number or valuation in which it was included.

An empty last column is an open item. An empty second column is a risk: work that may never be paid for.

Omissions

Omitted work does not look like a revenue risk, but it is one. If an omission is credited without taking into account the related margin and the preparation costs already incurred, you give back more than you need to. Check that the credit for omitted work matches what the contract says about it.

Provisional sums

For each provisional sum: budgeted amount, actual cost, amount settled. The difference between actual and budget, plus whatever mark-up the contract allows on it, should come back in the final account. A provisional sum that was exceeded and does not appear in the final account is an immediate finding.

Day works

With day works, the job sheet is the source of the invoice. Check that every job sheet has an invoice line, and that the hours on the job sheet match the hours in the time registration. Material taken from your own stock often never makes it onto the sheet. Hired plant that stays on site longer than booked is often not recharged.

Price adjustment

If the contract includes a clause for cost increases, check that adjustments were made at the agreed moments. This is a separate check that differs per contract. How to approach it is covered in contract checks for construction companies.

A monthly invoice check, step by step

A check you do every month catches more than one big check a year. This routine takes half an hour to an hour per live project, depending on its size.

1. Build a project overview. All live projects, with the contract sum, the amount invoiced to date, and the percentage complete according to the site manager.
2. Compare completion with invoicing. Is the invoiced percentage of the contract sum lower than the percentage complete? Then invoicing is behind. Find out which stage is missing.
3. Go through the variations register. Every item with the status done but not invoiced, and older than two weeks, goes to the project manager with one question: invoice it, bundle it into the next stage, or is there a reason not to?
4. Check the day works job sheets. Count the job sheets from last month and the number of day works sheets invoiced. A difference is a missing invoice or a sheet still lying in someone's van.
5. Put purchasing next to recharges. Purchase invoices booked to a project as variation or day works should have a matching recharge. Find the purchases without a counterpart.
6. Record the outcome per project. One line per finding, with an amount and an owner. Next month you start with this month's open items.

Worked example

Worked example: suppose an installation and construction company with EUR 8 million in revenue has twelve live projects on average. The first monthly check produces:

The first, second and fourth lines add up to EUR 45,600 that can be invoiced straight away. The third line is not extra revenue, but money that arrives one or two months earlier. For a project business running on an overdraft facility, that saves interest and headroom.

What matters in this example is not the total but the split. The first check finds months of backlog. Later checks only find what was added that month, which is much less. If you check monthly, you never again let a year of small items pile up.

Where does it get stuck in practice?

The project manager has no time for it. True, and that is why the check belongs with the finance or project administration team, with the project manager as the person who answers questions. Not the other way round.

Variations live in email, not in a system. Then the first step is not the check but the register. As long as variations exist only in mailboxes, nobody can check them.

Job sheets come in late. Agree a fixed deadline: job sheets from week 1 are in by the end of week 2 at the latest. A job sheet that turns up after a month cannot be invoiced without an argument in about half of cases.

Nobody knows what the contract says about price adjustment. Put the key contract terms on a single sheet at the start of every project. Without that sheet, the finance team cannot know when something needs to be adjusted.

Manual or automated?

While you have a handful of projects, this works in a spreadsheet. It gets difficult when the number of live projects grows, when variations per project run into the dozens, or when the data is spread across four or five systems. Then the check takes so much time that it gets skipped, and precisely in the busy months, when the most is left lying.

At that point it makes sense to automate the comparison: systems that put project administration, time registration and invoicing side by side and produce a list of differences. How that works, and which data you need for it, is covered in Revenue Intelligence for construction companies. The general principle for any sector is in how do you check that all revenue is invoiced, and specifically for loose items that fall through the cracks in how do you find forgotten invoices.

Frequently asked questions

Who should do the invoice checks in a construction company?

The project administration or finance team, with the project manager as the person who answers questions. The project manager is too close to the project and has too little time. A fresh pair of eyes sees more quickly what is missing.

How often should you check invoicing?

Monthly for every live project, and in full at every final account. An annual check finds more each time, but it comes too late for items that have since been disputed or have become time-barred.

What do you do with variations that were never put in writing?

Collect what you have: emails, site meeting minutes, photos, notes from the site manager. Put it to the client as soon as you discover it, not at the final account. The sooner, the better everyone remembers.

Isn't sending an invoice after the fact unprofessional?

An invoice for work you carried out and were instructed to do is never unprofessional. It is better if it happens within a few weeks, though. After months it gives the impression that your administration is not in order, and that weakens your position in any negotiation.

Do invoice checks make sense if we already use an ERP or construction software?

Yes. A system invoices what is in it. It does not see what is not in it: the variation still sitting in an email, the job sheet in the van, the price adjustment nobody entered. Checking is about exactly that gap.