Over- and underbilling aren't good or bad by themselves. They're the two ways a job's billing can drift from its earnings, and readers of your schedule judge you by whether you can explain the drift.
Overbilled: billed ahead of the work
Overbilling means you've invoiced more than you've earned. On the balance sheet it's a liability (billings in excess of costs and estimated earnings, BIE), because you owe that work. In cash terms it's usually healthy: you're being paid ahead of cost, and disciplined front-loading is normal on well-run jobs.
What raises an underwriter's eyebrow is overbilling with nothing behind it: a big BIE balance on a job whose costs have stalled, which can mean billings are running ahead of a job that's quietly in trouble.
Underbilled: work ahead of the billing
Underbilling means you've earned more than you've invoiced (costs and estimated earnings in excess of billings, CIE, an asset). A little of it is ordinary timing: work done at month-end that bills next cycle.
Persistent or growing underbilling is the one sureties chase hardest. It usually means one of three things: billings are behind schedule, unapproved change-order work is being carried as cost, or the estimate is wrong and the job is worth less than the schedule claims. All three are problems you want to find before your surety does.
What to fix first
- Underbilling on a job past 85% complete: bill it or restate it, this week.
- Underbilling that grew again since last close: find which of the three causes it is before the next one.
- Overbilled jobs with stalled costs: confirm the work behind the billings is real and progressing.
- Small, explained balances either direction: leave them alone. Zeroes aren't the goal, explanations are.