Construction Draws and Invoices

The term ‘construction draw’ is commonly used for invoices sent to a bank, where the bank will draw against an account to pay the invoice.

A construction draw is essentially the same thing as a contractor’s invoice. Since in this case, you may be the bank, just remember that contractors can use either term.

If the contractor submits an invoice that is in line with the terms of the agreement, it should be a simple thing to evaluate progress, check off completed items and make sure the contractor only invoices for completed progress or as contractually agreed.

Make sure to keep a copy of approved contractor invoice amounts and what it covers.

If something is not complete and you want to keep the project moving, you have two options:

1. You can write the contractor a letter telling them you will cut the check for the invoice amount less retention and you will hold the check until all the items on the invoice are complete. Then do exactly that. It incentivizes the contractor to complete the outstanding invoiced items so that they can collect their check.
2. You can write the contractor a letter letting them know that you are authorizing payment in accordance with the contract terms less incomplete work, which will be paid at a later date and execute that action.

Contractors are more likely to remain productive if they feel they are fairly treated. Showing a willingness to pay for completed work goes a long way to keeping that working relationship amicable.

Provide the Contractor’s Pay Request form to your contractors so they can use it when submitting invoices, if they don’t have one of their own.