Overbilling is when a contractor bills for labor and materials prior to work being completed. For example, a contractor might bill for 20% of the total contract value, when only 10% of the project has been completed.
The upside of overbilling
Overbilling is a strategy that is typically employed by contractors looking to improve cash flow by billing late-paying clients earlier. This way, they have more cash on hand to complete projects, start new projects before they get paid, and weather an unforeseen crisis.
The downside of overbilling
Overbilling can cause problems as well. If too much of contract’s value has been billed, and that money has been spent on other projects, it’s possible to run out of cash to complete the original project. This could cause the contractor to be cashflow negative at the end of the project, and will need to look elsewhere within the business to complete it.
Construction Metrics 