Material on site you haven't billed for
Bill stored materials with the backup the contract requires, the month you buy them.
On a job with long lead gear, switchgear or pipe, you may pay a supplier months before the material is installed. If your SOV bills it only as installed, you've financed that material for the GC, and your WIP will show you underbilled. Many subs skip stored materials because the paperwork looks like a hassle, and the GC's contract often requires insurance, a bill of sale, and proof of where the material is. That hassle is smaller than financing the cost for six months.
Three moves, in order
What CFOS does about it
CFOS handles stored materials on the pay app, next to the schedule of values and retainage, so it's part of the same G702 and G703 and not a side spreadsheet. Bills emailed to your bills inbox are read, coded to a job and checked against the PO, which tells you what has been bought and for which job. The WIP schedule shows over and under billing by job, so material you've paid for but haven't billed appears as underbilling you can act on. COIs are read when they come in and flagged when they're missing or expiring, which helps with the insurance paperwork some GCs ask for. QuickBooks still keeps the bills and invoices, and CFOS reads from and writes to it.
Who owns this: Controller, with the PM.
At $20M, $400K of unbilled gear for four months hurts cash.
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Step 06: Project management
Billing dates, change orders, and notices, written as standards that work without anyone following up on them.
Other problems step 06 solves
Other things that go wrong
What owners ask
Billing for stored materials?
Bill stored materials with the backup the contract requires, the month you buy them. On a job with long lead gear, switchgear or pipe, you may pay a supplier months before the material is installed. If your SOV bills it only as installed, you've financed that material for the GC, and your WIP will show you underbilled. Many subs skip stored materials because the paperwork looks like a hassle, and the GC's contract often requires insurance, a bill of sale, and proof of where the material is. That hassle is smaller than financing the cost for six months.
Which part of the system fixes this?
The step is number 06, project management. Billing dates, change orders, and notices, written as standards that work without anyone following up on them. It's drawn from chapter 6 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% before taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Read the subcontract for the stored materials clause and list what the GC requires, such as invoices, insurance, photos, a bill of sale and storage location.
Do all GCs allow billing for stored materials?
No. It depends on the contract and sometimes on the owner's lender. Read the clause before you bid, and price the job knowing whether you'll be paid for stored material or not.
What paperwork do GCs usually want?
A paid or open supplier invoice, a bill of sale or a similar transfer of title, proof of insurance, photos and the location where the material is stored. Some want it stored on site and some allow an offsite warehouse with extra proof. Ask for the list in writing at the start of the job.
How does stored material affect retainage?
The GC usually holds retainage on stored materials just like on installed work, unless the contract says otherwise. Your pay app should list the stored amount and the retainage on it separately so the totals tie. Check the retainage rules for your state too.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 06 depends on step 04, estimating system. Install it ahead of that and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.