Contractor money and paperwork terms
The money and paperwork words that come up when you price, bill, collect and hire: plain definitions, where each one shows up in a contractor's business, and the Koira guide, calculator or template that goes with it.
A
Money and paperworkAccounts payableAccounts payable is the money the business owes suppliers and subs for materials and work already received.Money and paperworkAccounts receivableAccounts receivable is the money customers owe you for work you have invoiced but not yet been paid for.Money and paperworkACH paymentAn ACH payment moves money directly from the customer's bank account to yours through the bank network, usually for a lower fee than cards.Money and paperworkAdditional insuredAn additional insured is a person or company added to your liability policy by endorsement so your policy also protects them for claims from your work.Money and paperworkAIA billingAIA billing is the pay application format on commercial jobs, built on standard American Institute of Architects forms: a summary sheet and a continuation sheet against the schedule of values.Shared with General ContractorAllowanceAn allowance is a dollar amount in a contract set aside for items the customer has not picked yet, such as tile, fixtures or lighting.Money and paperworkAR aging reportAn AR aging report lists unpaid invoices grouped by how long past due they are.
B
Money and paperworkBalance sheetA balance sheet lists what the business owns, what it owes and the owner's equity on a given date.Money and paperworkBillable hoursBillable hours are the hours actually spent on paid work, as opposed to driving, quoting, buying parts and admin.Money and paperworkBreak-even pointThe break-even point is the amount of sales at which revenue exactly covers all costs, with no profit or loss.
C
Money and paperworkCard processing feeA card processing fee is what a payment processor charges to take a card payment, usually a percentage of the amount plus a small fixed fee.Money and paperworkCash flowCash flow is the timing of money coming in and going out of the business.Money and paperworkCertificate of insuranceA certificate of insurance is a one page summary from your insurer showing your policies, limits and dates, sent to customers and general contractors as proof of coverage.Shared with General ContractorChange orderA change order is a signed document that changes the scope, price or schedule of a contract after work has started.Money and paperworkChargebackA chargeback is when a cardholder disputes a charge with their bank and the money is pulled back from the merchant while the dispute is reviewed.Money and paperworkConditional lien waiverA conditional lien waiver gives up lien rights only once a stated payment is actually received.Shared with General ContractorContingencyA contingency is money held in a budget for unknowns, such as rot behind a wall or bad soil, rather than for a specific item.Money and paperworkConvenience feeA convenience fee is a flat charge for paying through an alternative channel, such as online or by phone, rather than the standard way.Money and paperworkCost of goods soldCost of goods sold is the direct cost of the work you sold: materials, field labor and subs.Money and paperworkCost-plus contractA cost-plus contract pays the contractor's actual costs plus an agreed fee or percentage for overhead and profit.Money and paperworkCredit card surchargeA credit card surcharge is an extra charge added to a payment because the customer paid by credit card.
D
Money and paperworkDepositA deposit is money the customer pays when they accept an estimate, before work starts, to hold the date and cover materials.Money and paperworkDraw scheduleA draw schedule lists when and how much the contractor will be paid during a job, often matched to the lender's inspection of finished stages.Money and paperworkDue on receiptDue on receipt means the invoice is payable as soon as the customer gets it, with no grace period.
E
Money and paperworkEstimate vs quoteAn estimate is an approximate price that can change; a quote or bid is a firm price for a defined scope.Money and paperworkEstimated taxesEstimated taxes are payments self employed people make during the year toward their income and self-employment tax, since no employer withholds for them.
F
Money and paperworkFlat-rate pricingFlat-rate pricing quotes a set price for a job before the work starts, no matter how long it takes.Money and paperworkForm 1099-NECThis is the IRS form a business uses to report nonemployee compensation it paid to independent contractors.Money and paperworkForm W-9This is the IRS form a contractor or vendor fills out to give you their taxpayer identification number, so you can report what you paid them.
G
Money and paperworkGeneral liability insuranceGeneral liability insurance covers claims that your work damaged someone's property or hurt someone who is not your employee.Money and paperworkGood, better, best pricingGood, better, best pricing gives the customer a few priced options for the same job, from basic to premium, instead of a single price.
I
Money and paperworkIndependent contractorAn independent contractor is a person or business you hire for a job who controls how the work is done and runs their own business, rather than being your employee.Money and paperworkInvoice factoringInvoice factoring is selling your unpaid invoices to a finance company for a discount, so you get most of the cash now instead of waiting for the customer.
L
Money and paperworkLabor burdenLabor burden is the cost of an employee beyond the hourly wage: payroll taxes, workers comp, benefits and paid time off.Money and paperworkLabor rateThe labor rate is what you charge per hour of work, built from labor cost, burden, overhead and profit.Money and paperworkLate feeA late fee is a charge added to an invoice paid after its due date, set out in the payment terms.Money and paperworkLien waiverA lien waiver is a document in which a contractor or supplier gives up lien rights for a payment, usually signed in exchange for that payment.Money and paperworkLump sum contractA lump sum contract sets one total price for the whole defined scope of work.
M
N
Money and paperworkNet 30Net terms set how many days after the invoice date the customer has to pay.Money and paperworkNet profitNet profit is what is left after every cost of running the business, job costs and overhead, has been paid.Money and paperworkNTENTE, not to exceed, is a price cap on a work order or time and materials job.
P
Money and paperworkPayment bondA payment bond guarantees that a contractor will pay its subs and suppliers on a job, often required on public work where liens are not allowed.Money and paperworkPerformance bondA performance bond guarantees the owner that the contractor will complete the work under the contract, or the surety will step in.Money and paperworkPreliminary noticeA preliminary notice is a letter some states require subs and suppliers to send the owner early in a job to keep their lien rights.Money and paperworkPrice bookA price book is a contractor's list of standard jobs with set prices, so every tech quotes the same price for the same work.Money and paperworkProfit and loss statementA profit and loss statement shows income, costs and profit over a period, such as a month or a year.Money and paperworkProfit marginProfit margin is the share of the price you keep after costs.Money and paperworkProgress billingProgress billing is invoicing in stages as a job hits milestones or a share of completion, instead of one bill at the end.
R
Money and paperworkReceiptA receipt is the record given to a customer that a payment was received, showing the amount, date, method and what it paid for.Money and paperworkRetainageRetainage is a portion of each progress payment the owner or general contractor holds back until the job is complete, as security that the work gets finished.
S
Money and paperworkSchedule of valuesA schedule of values breaks a contract price into line items, each with a dollar value, that progress billing is measured against.Shared with General ContractorScope of workThe scope of work is the written description of exactly what a contractor will and will not do on a job: the tasks, materials, standards and exclusions.Money and paperworkSelf-employment taxSelf-employment tax is the Social Security and Medicare tax a self employed person pays on net earnings, covering both the employee and employer shares.Money and paperworkService agreementA service agreement is a contract for recurring work over a set period at a set price, listing the visits, what each covers and how renewal and cancellation work.Money and paperworkSubcontractor agreementA subcontractor agreement is the contract between a general contractor and a sub that sets the scope, price, schedule, insurance and payment terms.Money and paperworkSurety bondA surety bond is a guarantee from a bonding company that a contractor will meet an obligation, such as following license law or finishing a job, or the surety pays the claim.
U
Money and paperworkUnconditional lien waiverAn unconditional lien waiver gives up lien rights for an amount right away, whether or not the payment has cleared.Money and paperworkUnit costUnit cost is the cost per unit of work, such as per square foot, linear foot, fixture or opening, including labor and materials.
W
Money and paperworkW-2 employeeA W-2 employee works under your direction, and you withhold taxes from their pay, pay the employer share of payroll taxes and report their wages to the IRS at year end.Money and paperworkWIP reportA WIP report shows each open job's contract value, costs to date, billing to date and estimated percent complete, to spot jobs billed ahead or behind their costs.Money and paperworkWorkers compWorkers comp is insurance that pays medical bills and lost wages for employees hurt on the job, required for employees in most states.Money and paperworkWorkmanship warrantyA workmanship warranty is the contractor's promise to fix problems caused by their installation for a set time, separate from the manufacturer's product warranty.
More for contractors: money guides. Or browse the whole glossary.