Over/Under Billings in QuickBooks — How to Calculate

What Are Over Billings and Under Billings?

In construction accounting, revenue is recognized based on how much work has been completed — not simply based on how much has been invoiced. This is called the percentage of completion method.

When the amount billed does not match the amount earned, there is an imbalance:

• Over Billing (Billings in Excess of Costs) — The contractor has invoiced more than they have earned based on work completed. This is a liability on the balance sheet.
• Under Billing (Costs in Excess of Billings) — The contractor has completed more work than they have invoiced. This is an asset on the balance sheet.

The Formula

Worked Examples

Example 1 — Over Billed Project

The contractor billed $60,000 more than they have earned. This money has been received but the work has not been done yet — it is a liability.

Example 2 — Under Billed Project

The contractor has completed $250,000 worth of work but only billed $200,000. The $50,000 under billing is an asset — they have earned it but not collected it yet.

Why Banks and Bonding Companies Care

Construction lenders and bonding companies require a WIP schedule with over/under billings because it reveals the true financial health of the contractor's work-in-progress:

• Large over billings mean the contractor has spent money they received but hasn't done the work yet — risky if a job goes wrong
• Large under billings mean the contractor is not collecting fast enough — cash flow problem
• Banks use the net billings position (over minus under) to assess risk for construction loans
• Bonding companies use it to set bond limits

Where to Get the Data in QuickBooks Online

To calculate over/under billings for each job, you need to pull from QBO:

• Contract Value → Estimates (the signed contract amount per customer)
• Costs to Date → Bills and Expenses filtered by customer/job
• Billed to Date → Invoices filtered by customer/job
• Estimated Total Cost → This must be maintained manually — it is the total budgeted cost for the job

QuickBooks Online does not calculate over/under billings automatically. You must pull the data and run the calculations yourself — typically in Excel.

Common Errors When Calculating Over/Under Billings

• Using total contract costs instead of estimated total costs — if a job goes over budget, the denominator changes and the % complete calculation is wrong
• Including retainage in billings — retainage should be separated from the billed amount
• Not including all cost types — labor, materials, subs, and overhead must all be included in costs to date
• Wrong date cutoff — costs and billings must be pulled for the same reporting period
• Forgetting to include all active jobs — every job with costs or billings in the period must appear on the WIP

Automate Over/Under Billing Calculations

Calculating over/under billings manually for 10, 20, or 50 active jobs takes hours every month. ReconcileBook connects to QuickBooks Online and calculates the complete WIP schedule automatically — including over billings, under billings, percentage complete, earned revenue, and retainage for every active job.