RA billing, retention and advances: keeping project commercials under control
Billing on a large project is rarely one invoice. It is a series of running-account bills, each adjusted by retention, advances and deductions, and each needing proof that the work was done.
Why project commercials are hard
On an EPC project, money moves in several streams at once. Work is measured, certified and billed in stages. Part of each bill may be held as retention. An advance may be recovered. Deductions such as TDS apply. Variations and claims run on their own track. If each stream is tracked separately, no one has a live picture of the exposure.
Running-account billing in plain terms
Running-account billing means the contractor bills progressively as work is measured, rather than at the end. Each bill covers the work completed since the last one. That only works if measurement is reliable and linked to the BOQ item it belongs to.
What each element does
- Retention: an amount held back until a later point in the contract, to be released as agreed.
- Advances: money received or paid before work, which is recovered against later bills.
- TDS: tax deducted at source, which affects the amount received and needs to be accounted for.
- Variations: changes to scope that need their own record, approval and evidence.
- Claims: requests for additional time or cost, supported by documents.
The terms of each depend on the contract, which is why the system should record them as set for that project rather than assume them.
Evidence is the difference between billed and paid
Measured work and supporting evidence can miss certification or billing. A quantity not measured on time is a bill not raised on time. A variation without the instruction on file becomes a dispute. EPCOS keeps variations, claims and supporting documents connected to the work they relate to.
Quality gates and billing
Inspection and acceptance can control downstream measurement and billing. If work has not been accepted, it should not appear as billable. This protects the contractor from billing work that will later be rejected and keeps the client relationship clean.
A checklist for each bill
- Quantities measured against BOQ items, with dates.
- Quality acceptance recorded for the work billed.
- Previous billing and cumulative position shown.
- Retention and advance recovery calculated as per the contract.
- Deductions applied and recorded.
- Variations referenced with approval.
- Supporting documents attached.
Seeing exposure live
With a live commercial record, a project manager can see what is certified but not billed, what is billed but not received, what is held as retention and what is under claim. The finance team can then plan cashflow from the record rather than from a late summary.
Variations and claims need their own discipline
Variations and claims are where many project disputes begin. Treat each as a record with an instruction, a description of the change, a basis for the amount, the evidence and an approval status. Keep them separate from the base contract billing but linked to the work, so that the cumulative position can show both. Delays in raising them are often the main reason they are disputed, so an exception list for instructions without a matching variation is worth having.
Starting point
Choose one project and trace the last bill from measurement to receipt. Wherever a document, approval or figure had to be chased, that is where a linked record would help most.
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