Resources
The money side of contracting, in plain English.
Retainage, draws, progress billing, AIA forms, lien waivers, markup vs margin — the terms that decide whether a job makes money, explained without the jargon.
Glossary & guides
Construction money, explained
Retainage
Retainage is a portion of each progress payment — commonly 5% to 10% — that the owner or general contractor holds back until the work is substantially complete and accepted, as leverage to make sure the job actually gets finished.
ReadProgress billing
Progress billing is invoicing a construction project in installments as the work is completed, rather than collecting one lump sum at the end — so the contractor gets paid in step with progress and the owner pays for value actually in place.
ReadDraw schedule
A draw schedule is the agreed plan for releasing payments across a construction project — it lists each draw (payment), what triggers it, and how much it's worth, so the owner, lender, and contractor all know when money changes hands.
ReadSchedule of values
A schedule of values (SOV) is a detailed breakdown of a construction contract sum into individual line items of work, each with its own dollar value, so that progress can be measured and billed item by item as the job advances.
ReadAIA billing (G702 & G703)
AIA billing is a standardized way to request construction progress payments using two American Institute of Architects forms — the G702 Application and Certificate for Payment (the summary cover sheet) and the G703 Continuation Sheet (the line-item detail) — that work together as one pay application.
ReadLien waiver
A lien waiver is a signed document in which a contractor, subcontractor, or supplier gives up (waives) their right to file a mechanic's lien against a property, normally in exchange for receiving payment for the work or materials they provided.
ReadChange order
A change order is a written, mutually signed amendment to a construction contract that changes the scope of work, the contract price, the schedule, or all three — formally documenting work that wasn't in the original agreement before it's performed.
ReadMarkup vs margin
Markup is how much you add on top of your costs, expressed as a percentage of cost. Margin is how much of the final price is profit, expressed as a percentage of the selling price. They describe the same dollars from two different angles, so a 50% markup is only a 33% margin.
ReadJob costing
Job costing is the practice of tracking all the costs — labor, materials, subcontractors, equipment, and a share of overhead — against one specific project, so you can compare what a job actually cost to what you estimated and see whether it made money.
ReadPayment terms (net-30 and more)
Payment terms are the rules on an invoice that say when and how the customer must pay — for example, net-30 means the full amount is due within 30 days of the invoice date. The terms you choose directly control how long you wait to get paid.
ReadEstimate vs quote vs bid
An estimate is your best informed guess at what a job will cost and can change as the work is uncovered. A quote (or bid) is a firm, fixed price you commit to honor. The difference is binding intent: an estimate is approximate, a quote is a promise.
ReadMaterial takeoff
A material takeoff is an itemized list of every material and quantity a project needs, measured directly from the drawings or the site. It is the raw quantity count — boards, fixtures, square footage — that a contractor then prices to build an accurate estimate.
ReadPercent-complete accounting
Percent-complete accounting (the percentage-of-completion method) recognizes a project's revenue and profit gradually as the work progresses, rather than all at once when the job finishes. It matches income to the share of the job you have actually completed.
ReadOverhead & profit
Overhead and profit (often written O&P) are the two amounts you add on top of a job's direct costs: overhead covers the cost of running your business that no single job pays for, and profit is what is left for you after both direct costs and overhead are covered.
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