Reference
The terms that decide whether a contractor gets paid on time, defined without the accounting fog. Each one answers in the first sentence.
Underbilling is when the cost you have incurred on a job exceeds what you have billed for it. It appears on a work in progress schedule as costs in excess of billings, and it represents work you have already paid for but not yet invoiced.
Overbilling is when you have billed a customer for more than the cost you have incurred on that job. It appears on a work in progress schedule as billings in excess of costs, and it is a liability rather than profit: the work is still owed.
A work in progress schedule is a report showing every open job with its contract value, costs to date, estimated cost to complete, percentage complete, revenue earned, and the resulting over or under billing position. It is the central financial document of a construction business.
Retainage is a percentage of each payment, commonly 5 to 10%, that an owner or general contractor withholds until the project is complete. It is intended as security that the work will be finished and defects corrected, and it is released at or after final completion.
Profit fade is when a job finishes at a lower margin than previously reported. It happens when estimated cost to complete was too low, or when work performed on unapproved change orders is negotiated down or written off at close.
Bonding capacity is the maximum value of bonded work a surety will support, expressed both as a single-job limit and an aggregate program limit. It is an underwriting judgment based on working capital, equity, track record and the reliability of your financial reporting.
A schedule of values is a breakdown of a contract into line items with a dollar value assigned to each, totalling the contract price. Progress billing is based on the percentage of each line item completed, so it determines how and when you get paid.
A change order request, or COR, is a formal submission asking a general contractor or owner to approve a change in contract scope and price. It becomes a change order only once signed, and until then the work sits on your books as unbilled cost.
A time and materials tag records the labor, equipment and materials used on work performed outside the original contract scope. Signed on site by the customer representative, it is the evidence underneath a change order request.