Understanding Automated Percentage of Completion - Over/Under Billing Controls

In today’s fast-paced construction environment, accurate percentage of completion reporting is more than a necessity—it’s a cornerstone of financial health.

When a project shows that it is performing when it is not, there is reduced pressure to perform. With strong percentage of completion financial controls, stakeholders gain the vital visibility needed to reduce risk, ensure viability and protect profits.

Mistakes in the mechanics can lead to inaccurate reporting. Inaccurate reporting increases risks, strains bonding/banking relationships and reduce confidence in your organization. This is where a strong system array of systems and controls that automate the mechanics of the percentage of completion method of accounting plays a vital role in modern construction financial operations.

Automated Percentage of Completion Method of Accounting Illustrated

TimeSuite's Array of Systems and Controls Include

• Automated percentage of completion entries for Accrued Wages, Equipment, Depreciation, and Over/Under Billings

• A Job Status Projection Facility that provides budget line item projections and drives over/under billings. The Facility provides for projections in dollars, hours and production units. The Facility also provides visibility on committed costs balances, posted costs and unposted costs in real time.

• A dynamic Burden Utility Facility provides for the retroactive allocation of over/under allocated indirect costs based on the way the job was estimated.

• A Summary of Contracts Log monitoring trends and provides clear visibility on profit gain and fade over the lives of projects.

• Project dashboards and reporting include costs in real time. Burdened unpaid labor hit projects on clock-outs. Unapproved costs (AP Invoices) are clearly segregated and reflected immediately on email/drop into drop-zones (using AI invoice scraping).

What Overbilling and Underbilling Mean

Simply put:

• Accurate over/under billings ensure financials adhere to the matching principle. Revenues must be reflected in the same period as cost and the profit on those costs.

• Overbilling occurs when job to date billings through a reporting period (cutoff date) exceeds the job to date costs plus profits on costs through the cutoff date.

• Underbilling happens when job to date billings are lower than job to date costs plus profits on costs through the cutoff date.

A crucial component in the process is accurately projected profitability of uncompleted projects. Generally Accepted Accounting Principles (GAAP) requires budget line item projections for projects. Also crucial is your ability to gain visibility on profit gain and loss over reporting periods.

How Automation Improves Financial Accuracy

Automated controls are designed to reduce errors and improve consistency while keeping human oversight in place. By incorporating smart validation logic and real-time data checks within TimeSuite’s centralized, relational platform, automation helps ensure discrepancies are detected and corrected. Controllers/Accountants spend their time analyzing their financials rather than time putting cumbersome schedules together. By automating the mechanics of the percentage of completion method of accounting through TimeSuite, your organizations financial data is significantly more likely to be accurate, professional, and timely. Better visibility reduces financial risk for not only your organization but the bonding companies and banks. Improving relationships lends to more confidence, better bonding and interest rates and a better future.

Key Benefits

1. Accountability

If a project shows that it is performing when it is not, there is reduced pressure to perform. With strong percentage of completion financial controls, stakeholders gain the vital visibility needed to reduce risk, ensure viability and protect profits.

1. Total Costs and Revenue Visibility

A full summary of contracts proves your costs and revenues tie to your income statement. (Proving that in total, everything is accounted for)

2. Indirect Costs Visibility

Over/Under allocated indirect costs are clearing visible on every income statement. An over/under allocation burden utility provides for burdens to be easily trued up.

3. Estimating Visibility

With your over/under allocated indirects trued up, estimators can be provided burdened rates with confidence. Budget Actual Variances are meaningful.

2. Minimizing Human Error

Manually putting together a full Summary of Contracts (or worse, only a work in progress) is prone to significant inefficiencies and deficiencies. Mistakes, miscalculations, and/or missed entries can be included in reporting with a reduced ability to be aware of these issues. Automation reduces repetitive tasks, allowing teams to focus on verifying information rather than time consuming manual tasks.

3. Early Detection and Alerts

Automated systems can highlight potential issues in real time, such as invoices that deviate from expected amounts or mismatched project data. Early alerts give finance teams the chance to investigate and resolve issues before they affect reporting, cash flow, or client trust.

4. Clear Audit Trails

Every adjustment, review, and approval is automatically recorded in TimeSuite, creating a detailed, traceable history. This transparency not only provides visibility on project manager performance and simplifies audits but also helps demonstrate compliance with internal and external financial standards.

Why Strong Percentage of Completion Reporting Matters

Reliable projections and cost controls offer more than error prevention—they are a strategic advantage for construction companies:

• Protects Revenue: Ensures billing aligns with actual services delivered or materials provided.

• Boosts Efficiency: Reduces time spent reconciling errors, freeing staff for higher-value tasks.

• Supports Compliance: Detailed records and automated validations simplify audits and regulatory reviews.

• Enhances Trust: Accurate, predictable financials builds confidence with the bonding companies, banks, clients and stakeholders.

Best Practices for Effective Controls

Automated percentage of completion reporting controls empower construction companies to maintain accurate, transparent, and reliable financial operations:

• A full summary of contracts proves the income statement (double entry accounting system) ties out to job schedules.

• A reliable, efficient burden utility provides for periodically truing up over/under allocated indirect costs.

• Project schedules that provides visibility on unpaid timecard costs and unapproved costs (AP Invoices) gives project manages a real time picture of costs, better visibility that lends to better projections and controls, and quicker-better visibility relating to potential issues on projects.

• Monitoring trends with TimeSuite's Summary of Contracts Log lends to project manager accountability and in turn accountability by superintendents, crews, subcontractors and suppliers.

By combining automation with thoughtful process design in TimeSuite’s centralized, relational ERP, teams can reduce errors, safeguard revenue, and ensure quality financial reporting and project project profits with real time data—building stronger relationships with bonding companies, bankers, clients and auditors.