Invoicing for construction trades: specifics and pitfalls
Introduction
In the construction sector, an invoice is never just a simple invoice. Between the signed quote and the final payment, you must juggle start-up deposits, progress invoices that track site advancement, unforeseen additional works and the final statement. Each stage has its rules, mandatory mentions and tax pitfalls.
Tradespeople and construction companies face specific challenges: sites that span several months, significant amounts that tie up cash flow, and VAT management that differs depending on whether you invoice a deposit, a progress payment or the final balance. An error in numbering, an oversight on VAT for a deposit or additional work invoiced without written agreement can prove costly.
This guide details the specifics of invoicing for construction trades: how to manage deposits correctly, establish compliant progress statements, calculate the final statement and avoid errors that delay your payments. Concrete explanations for invoicing your sites in full compliance.
📌 Summary (TL;DR)
Invoicing in construction follows a specific process: start-up deposits, progress invoices to track advancement, and final statement. Each type of invoice has its mandatory mentions and VAT rules. Common pitfalls include incorrect numbering, VAT errors on deposits, absence of supporting documents and invoicing modifications without written agreement.
Rigorous management of deposits secures your cash flow, whilst progress statements allow tracking of long sites. The final statement must reconcile all partial payments and integrate any validated additional works.
📚 Table of contents
- The specifics of invoicing in construction
- The different types of invoices in construction
- Invoicing site deposits: instructions for use
- Progress invoices: tracking site advancement
- The final invoice and definitive statement
- Pitfalls to avoid in construction invoicing
- Simplifying your construction invoicing with the right tools
The specifics of invoicing in construction
The construction sector imposes unique constraints on invoicing. Sites span several weeks or months, which complicates financial tracking.
Material costs often represent 40 to 60% of the total amount and must be advanced from the start. Labour varies according to progress, and several trades intervene successively.
This reality creates significant cash flow requirements. Unlike a one-off service, you cannot wait until the end of the project to receive payment. Hence the importance of deposits and interim invoices to maintain your financial balance throughout the site.
The different types of invoices in construction
Invoicing in construction uses several documents depending on the project stage:
- The quote: contractual document detailing works and prices before starting
- The deposit invoice: request for partial payment at launch or during the site
- The progress invoice: progressive invoicing based on actual work advancement
- The final invoice: final statement including the balance after deduction of sums already paid
Each document meets a specific need. Deposits secure your cash flow, progress payments track large sites, and the final invoice regularises everything.
Invoicing site deposits: instructions for use
Deposits form the basis of financial management in construction. They allow you to purchase materials and cover initial costs without waiting for the site to finish.
Common practice provides for a first deposit of 30 to 40% upon contract signature, then interim payments according to progress. Some professionals invoice 30% at start-up, 30% at mid-point, then the balance upon completion.
For comprehensive management of deposits and their accounting implications, consult our guide on invoicing and managing customer deposits.
Why request deposits in construction
Deposits meet four essential needs in the construction sector:
Material purchase: you often must order and pay for supplies before even starting the works. The deposit covers these initial expenses.
Mobilisation costs: equipment hire, team travel, site preparation generate immediate costs.
Protection against non-payment: a client who pays 30 to 40% at start-up demonstrates their solvency and commitment.
Cash flow management: you avoid advancing several weeks or months of charges without any payment received.
Mandatory mentions on a deposit invoice
A deposit invoice must contain all the elements of a standard invoice, plus specific mentions:
- The clear mention "Deposit" or "Partial invoice"
- Reference to the accepted quote (number and date)
- Description of the works covered by the site
- The amount excluding VAT, the rate and amount of VAT, the total including VAT
- A unique invoice number in your sequence
- The Swiss QR-code to facilitate payment
These elements guarantee legal compliance and facilitate accounting tracking for you and your client.
How to manage VAT on deposits
VAT applies upon receipt of the deposit, not only on the final invoice. You must invoice VAT at the standard rate of 8.1% on each deposit.
Crucial point: on the final invoice, you deduct the total amount of deposits already invoiced (VAT included). The balance to pay corresponds to the total amount including VAT minus the deposits including VAT already paid.
This method avoids invoicing VAT twice. To explore VAT management in your invoices further, consult our page dedicated to VAT features.
Progress invoices: tracking site advancement
Progress invoices constitute a more precise method than flat-rate deposits. They are mainly used on large sites and public contracts.
Unlike a 30% deposit set arbitrarily, a progress payment invoices exactly the works completed at a given date. If you have completed 35% of the works, you invoice 35% of the total amount.
This approach offers more transparency and corresponds better to the reality of progress. However, it requires rigorous tracking and regular site surveys.
What is a progress invoice
A progress invoice, also called "progress statement", documents and invoices works actually executed at a specific date. It is based on an objective progress assessment, often expressed as a percentage.
The difference from a flat-rate deposit: the deposit represents a percentage agreed in advance (30% at start-up), whilst the progress payment reflects actual progress measured on site.
Progress payments are numbered (Progress statement no.1, no.2, etc.) and each summarises the cumulative works from the start, then deducts previous progress payments to calculate the amount to pay.
How to establish a progress statement
Establishing a progress statement follows a structured process:
1. Site survey: you assess the progress of each item in the quote (masonry, electrical, plumbing, etc.).
2. Calculation by item: you apply the progress percentage to the unit prices in the initial quote.
3. Cumulative total: you add up all items to obtain the total amount of works completed from the start.
4. Deduction: you subtract progress payments already invoiced. The result gives the amount to invoice for this period.
Example: Site of 100,000 CHF. Progress statement no.1: 35,000 CHF invoiced. Progress statement no.2: cumulative 60,000 CHF - 35,000 already invoiced = 25,000 CHF to invoice.
The final invoice and definitive statement
The final invoice closes the site financially. It summarises all works completed and regularises all interim payments.
This document must be particularly careful as it constitutes the reference in case of subsequent dispute. It includes not only the balance to pay, but also a complete summary of all sums already paid.
The mention "Final invoice" or "Balance" must appear clearly to distinguish this document from previous deposits and progress payments.
Establishing the final statement
The final statement must present a complete overview of the project:
- Total amount of works: including all items from the initial quote
- Summary of payments: list of all deposits and progress payments already invoiced with their amounts including VAT
- Additional works: extras validated during the site
- Possible reductions: planned works not carried out
- Balance to pay: difference between the total and sums already paid
This clear presentation avoids misunderstandings and facilitates validation by the client.
Managing additional works
Additional works represent a frequent source of disputes in construction. The golden rule: always obtain written agreement before executing.
Establish a supplementary quote or an amendment to the initial contract as soon as a modification is requested. Have it signed by the client before starting the works concerned.
For integration into invoicing, two options: include extras in the final statement if amounts remain modest, or create a separate invoice for significant modifications. In all cases, clearly reference the signed agreement document.
Pitfalls to avoid in construction invoicing
Invoicing in construction involves specific risks that can prove costly in time and money. Here are the most frequent errors and how to avoid them.
These pitfalls affect both legal compliance and practical management of your receipts. Particular vigilance on these points will save you complications with your clients, your accounting and the tax authorities.
Forgetting to number invoices correctly
Each invoicing document must bear a unique number in a continuous sequence: deposits, progress payments and final invoice included.
The common error: restarting numbering for each type of document (Deposit-1, Deposit-2, then Final-1). This practice creates duplicates and poses problems in case of tax audit.
Recommended system: a single annual sequence (2024-001, 2024-002, etc.) for all your invoicing documents, whatever their type. Simple, compliant and risk-free.
Mismanaging VAT on deposits
The classic error: invoicing VAT on each deposit, then re-invoicing VAT on the total amount in the final invoice. Result: you invoice VAT twice on deposits.
The correct method: your final invoice shows the total amount including VAT, then deducts deposits including VAT already invoiced. The balance to pay represents the difference.
Simple verification: add up all your deposits including VAT and your balance including VAT. The total must correspond exactly to the total amount including VAT for the works.
Not keeping supporting documents
In case of dispute over works or invoiced amounts, your documents constitute your only protection. Systematically keep:
- The quote signed by the client
- Material purchase orders
- Completion or progress reports
- Site photos at key stages
- All written exchanges (emails, letters) on modifications
These documents justify your invoices and facilitate recovery in case of dispute.
Invoicing without written agreement on modifications
Carrying out additional works on simple oral request from the client constitutes the major risk in the sector. Without written agreement, you will have the greatest difficulty getting paid.
The client can dispute having requested these works, or refuse the price you apply. Result: you have provided materials and labour without payment guarantee.
Solution: systematically have an amendment or supplementary quote signed before any modification to the initial project.
Simplifying your construction invoicing with the right tools
The complexity of invoicing in construction justifies using appropriate tools. Invoicing software saves you time and reduces errors on deposits and VAT.
Useful features for construction professionals: quick creation of compliant deposit invoices with Swiss QR-codes, automatic calculation of VAT at 8.1%, tracking of partial payments by site, automatic deduction of deposits on the final invoice, automatic reminders for non-payments.
BePaid offers these features in a simple interface, without complex training. You create your deposit and final invoices in a few clicks, with automatic VAT management and compliant numbering. The free version allows testing with 10 invoices per month, the Premium version at 20 CHF/month removes all limits.
Invoicing in construction trades requires particular rigour. Between start-up deposits, progress invoices to track advancement and the final statement with its possible extras, each stage must be documented and invoiced correctly.
The pitfalls are numerous: VAT miscalculated on deposits, inconsistent numbering, additional works invoiced without written agreement, or missing supporting documents. These errors can prove costly in client disputes and administrative complications.
The good news? With the right tools, you can considerably simplify this management. BePaid allows you to create compliant deposit and progress invoices in a few clicks, automatically manage VAT on partial payments, and precisely track the progress of your sites. No more juggling between several documents or manually recalculating each progress statement. Test for free and focus on your trade rather than on your invoicing.
