No one likes being overcharged. Whether it’s a mystery drink on your bill at the end of a night or an unexpected service fee, it’s frustrating and will more than likely make you think twice about doing business there again.
This is as much the case in the world of construction, typically taking the form of subcontractor overbilling. Overbilling tends to slip in unnoticed, buried in vague line items or unapproved work, but its impact is unmistakable. A single padded line item can bend budgets, cloud progress reports, and erode trust between builder and subcontractor.
In this article, we’ll share five strategies general contractors can use to stay ahead of overbilling and keep their project finances on steady ground.
1. Scrutinize the Contract Terms and Schedule of Values (SOV)
Preventing subcontractor overbilling starts with clear contract terms. Subcontract agreements should limit billing strictly to completed work or materials stored and verified on-site. Watch carefully for frontloaded SOVs that allocate excessive costs to early stages. The schedule of values needs enough detail to measure progress clearly. Avoid lump-sum entries, which can hide inflated charges. If a subcontractor proposes an unbalanced item, such as $200,000 for mobilization on a $1 million project, negotiate for a fairer distribution. Clearly state in contracts that billing ahead of actual progress is not permitted. Make sure your project team fully understands these terms. This clarity helps prevent overbilling right from the start.
2. Align on Billing Procedures and Communicate Expectations
Clear communication prevents many billing issues before they happen. Before work starts, hold a preconstruction meeting with subcontractors to review billing procedures. Explain that each pay application must match work completed or materials verified on-site. Confirm that all change orders need written approval before billing. Tell subcontractors their invoices will be closely reviewed. Percent-complete claims should align exactly with actual field progress as confirmed by the project team. This establishes clear expectations and encourages accurate billing from subcontractors. It also creates space for subcontractors to openly discuss cash-flow concerns. If needed, you can address these concerns directly within the contract through mobilization payments or adjusted retainage releases. Building transparency from the start reinforces trust and reduces the risk of overbilling.
3. Enforce Strict Change Order Protocols
Change orders frequently cause billing disputes. To avoid this, never allow unapproved work to appear on pay applications. Make it clear that subcontractors performing work without an approved change order or written directive do so at their own financial risk. Project managers should promptly handle change order requests to avoid delays. However, the accounting team must enforce a clear rule: unapproved changes cannot be billed. Subcontractors often mistakenly bill for work they assume will later be approved. Prevent this by setting a firm, standard procedure. Require subcontractors to track change order work separately and bill for it only after formal approval. Enforcing strict change order protocols significantly reduces opportunities for overbilling.
4. Perform Internal Audits of Subcontractor Billing
Regular internal audits can identify billing issues early, particularly on larger projects. Don’t wait for a final audit by the project owner. Instead, periodically have someone from your team carefully review subcontractor invoices. Check the accuracy of calculations, confirm billed change orders match approvals, and compare billed amounts to actual progress in the field. These internal reviews catch intentional overbilling as well as simple mistakes like duplicate charges or incorrect rates. Early detection prevents minor issues from becoming larger problems later. Additionally, knowing your team performs regular audits can discourage subcontractors from submitting questionable invoices. If internal resources are limited, consider bringing in an external auditor on major projects. Although it involves some cost, regular audits can save significant money by preventing overbilling.
5. Use Technology to Improve Subcontractor Billing
Construction-specific billing software can greatly reduce subcontractor overbilling. Digital platforms like GCPay automate the pay application process between subcontractors and general contractors. GCPay’s built-in controls prevent subcontractors from billing more than contract amounts or submitting invoices for unapproved change orders. The software blocks line items from exceeding agreed values and requires proper documentation, such as lien waivers and insurance certificates, before payments are approved.
Another advantage of systems like GCPay is real-time transparency. General contractors and subcontractors always see exactly which invoices are approved, pending, or still outstanding. This openness builds trust and accountability on both sides. Automated workflows allow project managers, accounting teams, and even owners to review and approve invoices quickly from one central location. The result is fewer disputes and faster payments. As one GCPay user noted on G2, with a transparent digital platform, “you have an up-to-date snapshot of exactly where each subcontractor stands in their billing,” avoiding surprises and conflicts.
Contractors still using paper or spreadsheets commonly report frustration and billing errors. Adopting a specialized billing system like GCPay significantly reduces mistakes, catches overbilling attempts early, and streamlines the entire billing process. It’s an effective way to keep project finances accurate and under control.
Take Control of Subcontractor Billing with GCPay
Preventing overbilling comes down to transparency. When subcontractors and general contractors clearly see what’s billed, approved, and outstanding, payments stay accurate, fair, and on time. That transparency creates trust, strengthening your relationships and positioning your business for long-term success. With GCPay, you have the knowledge, diligence, and technology you need to protect your project budgets and reduce billing disputes. Don’t wait for overbilling to catch you by surprise.
Ready to see GCPay in action? Book your demo today and see how GCPay helps general contractors stay ahead of subcontractor billing.