What are under billings?
Revenue earned on a job that has not yet been billed. A remodeler who earned $22,000 and billed $14,000 is $8,000 under-billed.
Definition
Under billings are the leftover after you subtract billings from revenue already earned on a job. On the books, this is a current asset, not accounts receivable and not extra cash.
A remodeler who has finished more work than has been billed still has a right to invoice that leftover. The earned amount sits as an asset until the next bill catches up.
It is a date-balance on the Balance Sheet, not a P&L surprise. Earned work can run ahead when cost is in and the next milestone invoice has not been sent.
Stay with that earned-versus-billed shortfall. The opposite gap, where invoices sit ahead of earned work, belongs on another page.
Where it shows up
Balance Sheet: Located in the current assets section.
P&L: Related to revenue earned that has not been invoiced yet.
Cash flow: Related to nothing until that earned work is billed and collected.
See also: Work In Progress Schedule · Percentage Of Completion · Unbilled Receivables
When you look at your Balance Sheet, under billings sit in current assets, often near unbilled receivables. When the figure is high, jobs have earned more than they have billed; when it is low or zero, invoices have kept up with the work.
The Income Statement does not list this asset as a line. The related revenue is already on the P&L if it was earned; invoicing later does not record that amount a second time.
On the Statement of Cash Flows, this account is still waiting on a bill and a collection. Cash does not move until that earned work is invoiced and the customer pays.
Liquidity can look thin even when profit looks fine. The leftover is earned, but it is not spendable until it bills and collects.
How it works
A typical path starts with a long job billed in stages. Cost goes in, the job is partly finished, and the next invoice has not gone out yet.
Earned revenue follows how finished the job is, usually from cost incurred against total estimated cost. The invoice schedule in the contract can lag that earned share.
When earned revenue exceeds billings, the gap is this asset. The books record the earned work on the P&L and park the unbilled leftover here.
Stay on that unbilled earned amount. Do not wait for the invoice before recognizing work that is already done.
When the remodeler later sends a bill that covers the gap, this asset falls and accounts receivable rises. Revenue does not move again, because it was already earned.
If the next invoice is still smaller than the earned total, some of this asset remains. The leftover stays until billings catch up.
Tracking cost and revenue by job is how the gap stays visible. Without that job record, earned work can sit off the books until a late invoice finally posts.
The supporting file is the job-by-job comparison of cost in, earned revenue, and amounts billed. That schedule is what proves the $8,000, not a desk drawer of unsent invoices.
Example
North Pine Kitchens, a neighborhood remodeler, is partway through a $50,000 kitchen. Cost in so far is $17,600 against $40,000 of total estimated cost, so the job is 44 percent done and has earned $22,000.
The remodeler has billed only $14,000 on that same job. Earned revenue of $22,000 minus billings of $14,000 leaves $8,000 of under billings.
The books record the unbilled earned amount:
Debit: Under billings $8,000
Credit: Revenue $8,000
Under billings (an asset) and revenue both go up by $8,000. Cash has not moved, and the customer has not received that extra bill.
The Balance Sheet is larger on the asset side. The Income Statement now shows the $22,000 earned, not only the $14,000 billed.
If the next month the remodeler bills $8,000 without earning more, this asset falls back to zero and accounts receivable rises by $8,000. Revenue does not record the $8,000 again.
Common mix-ups
Under billings are not accounts receivable. AR starts when the invoice exists; this asset is earned work still waiting on that invoice.
Under billings are not the same as a contract asset. A contract asset still depends on something more than sending the bill; this page is the earned-versus-billed gap on a job.
Under billings are not the same as over billings. Over billings are amounts billed beyond revenue earned so far; this page is the opposite gap.
Related terms
- Work In Progress Schedule: The job-by-job schedule comparing cost incurred, revenue earned, and amounts billed.
- Over Billings: Amounts billed on a job beyond the revenue earned so far.
- Percentage Of Completion: Recognizing revenue in proportion to how much of a job is finished.
- Unbilled Receivables: Revenue earned but not yet invoiced to the customer.
- Progress Billing: Invoicing a customer in stages as work is completed.
- Contract Asset: A right to payment that depends on something more than the passage of time.
- Job Costing: Tracking revenue and cost for each individual job, project, or order.
- Current Assets: Assets expected to turn into cash or be used up within one year.