LEOP, James Keannel A.

March 6, 2023
PSMBC101 – Construction Accounting, Cost Control and Finance Discussion Week

I affirm that I have not given or received any unauthorized help on this assignment and that this
work is my own.
Overbilling is only a concern when a contractor overbills on a project without realizing it and is then caught
off guard near the end, needing to endure a period of negative cash flow to complete the project.
Contrary to its nicer relative "overbilling," underbilling on building projects virtually never works out well. Due
to the razor-thin profit margins in the construction business, even a brief decrease in cash flow brought on
by underbilling as a result of late payment practices can cause significant financial harm. Yet, under- and
overbilling on a project both point to an organization's lack of accounting efficiency and financial control. It
can be fatal in the building industry.

The best construction companies often boast strong financial and accounting teams that keep up with project
costs, progress, and cash flow on a daily basis, and not just at the end of the month or a project when it's
"time to close out the books." Managed overbilling can be a useful component in a construction company's
financial toolbox to help mitigate the impact that the industry's notoriously slow payment practices has on
cash flow. The secret is to make sure you keep tabs on your project costs, progress, and billings so you know
exactly where you stand.