Subcontractor Bill Payments

Subcontractor Bill Payments

Managing subcontractor invoices is one of the most time-consuming and overlooked aspects of construction bookkeeping. Many general contractors continue to receive paper invoices or emailed PDFs, file them away in folders, and hold on to them until it’s time to write checks. While this approach may seem simple, it can become confusing and difficult to manage.

It also makes it much more difficult to understand the true financial position of each construction project. By entering subcontractor invoices into your accounting system as soon as they are received, you gain real-time visibility into your project costs, improve cash flow management, and simplify the entire payment process.

Recording subcontractor bills before they’re paid is an important part of construction bookkeeping. 

Why Is It Important to Record Subcontractor Bills?

Maintain Accurate Job Cost Accounting

One of the biggest mistakes construction companies make is waiting until a check clears the bank before recording a subcontractor expense. This causes job costs to lag behind the actual work being completed.

By entering bills when they are received, each project reflects its current costs instead of only the expenses that have already been paid. This gives the business owner or project manager, timely information regarding the job profitability of each project instead of after the work is finished.

Know Exactly What You Owe

When invoices remain in paper files or email folders, it’s difficult to know how much is owed to subcontractors without manually reviewing every invoice.

Recording bills in QuickBooks allows you to see your outstanding payables instantly with a report only a couple clicks away. You always know which invoices are due, which vendors need to be paid, and how much cash you’ll need for upcoming payments.

Subcontractor Deposits

Many subcontractors require deposits before work begins to cover material purchases. When these deposits are paid outside of an organized accounting system, it’s easy to forget them especially if there are many on a large project.

Later, when the final invoice arrives, the subcontractor may not clearly reference the deposit that has already been paid. Without accurate records, contractors often spend valuable time searching through old checks, bank statements, and email conversations to verify previous payments.

Recording every bill and payment in your accounting system creates a complete history of each subcontractor’s account, eliminates the guesswork, and most importantly saves valuable time. Who doesn’t want to save time and be more efficient.

Simplify the Payment Process

An organized accounts payable system allows you to schedule payments, avoid missed due dates, and maintain positive relationships with your subcontractors.

Instead of searching through stacks of invoices and handwriting checks, you can quickly review all outstanding bills, select the invoices to pay, and generate payments from QuickBooks with complete documentation attached to each transaction.

Simplify 1099 Preparation

Before issuing payments to a subcontractor, it’s important to verify that all required documentation has been received. This typically includes a completed W-9, proof of general liability insurance, and workers’ compensation insurance when applicable.

Keeping these documents organized alongside your subcontractor records helps reduce risk, simplifies year-end 1099 preparation, and ensures you’re working with properly documented subcontractors.

Summary

An organized subcontractor bill payment process does much more than help you pay invoices on time. It provides accurate job cost information, eliminates uncertainty about outstanding bills, and saves time in the long run by being able to more efficiently pay the bills.

At Kraft and Sons, we record subcontractor invoices as they are received—not weeks later when a check clears the bank. This gives our construction clients up-to-date job cost information, organized accounts payable records, and a streamlined payment process that saves time while improving financial visibility.