How to Invoice Cost Plus Projects
Cost-plus construction projects can be a win–win for you and your clients. You get paid for actual project costs plus an agreed markup, making sure you're fairly compensated as the job evolves. And your clients benefit from full transparency about where their money goes and have the flexibility to make changes along the way. This approach helps reduce the risk of underbidding and surprise costs for everyone involved.
But there's a catch: being a successful cost-plus contractor depends entirely on two things:
How well you estimate.
And how regularly you invoice.
Consistent, scheduled invoicing is the backbone of a healthy cost-plus model in the residential construction industry. It's not just about accuracy—it's about sending clear, complete invoices on a reliable cadence. When you delay or skip cycles, you disrupt cash flow, confuse the client, and erode trust. But when invoicing happens like clockwork, it creates rhythm and reliability in the relationship. Clients stay informed, payments stay on track, and your profit stays protected as costs shift.
In this article, you'll learn how cost-plus invoicing works, what to include to keep the process clear and transparent, and invoicing best practices for cost-plus projects. We'll also look at ways to simplify and streamline your workflow, including how tools like Buildwise can help you manage your cost-plus invoicing process.
What Is a Cost Plus Project?
In a cost-plus project, you bill your client for the actual costs of construction, meaning labor, materials, and trade contractors, plus a markup or fee. That markup can be a fixed percentage or a flat amount, and it's meant to cover your indirect costs like overhead expenses and contribute to your net profit.
Cost-plus contracts are popular in custom home building and high-end remodeling or construction companies because of the complexity involved. Modern projects often have many moving parts, design details that evolve over time, and clients who want the flexibility to make changes as they go. This makes cost-plus a better option than fixed price contracts, which can feel too rigid when so much is still being decided.
But cost-plus agreements only work well if you're diligent about tracking and documenting every cost. It's part of the commitment you make when you sell the job: you're agreeing to be transparent and accountable. Effective cost tracking helps you avoid disputes, maintain trust with your client, and ensure you're billing for everything so you don't lose profitability along the way.
Buildwise is purpose-built for cost-plus construction to help you achieve precisely that.
Key Components of a Cost Plus Invoice
A cost-plus invoice is how you show your client exactly where their money is going. The clearer and more organized it is, the easier it is to maintain trust, avoid payment delays, and keep everyone aligned.
The challenge many builders face is twofold:
Unclear expectations around what to include within the invoice
And software tools that either oversimplify or overwhelm the process
The result is invoices that are either too vague or so bloated they confuse rather than clarify.
A strong cost-plus invoice package has three essential components:
1. The Invoice
A clear summary of total job costs, builder's fee, taxes (if applicable), and the amount due. There are different formats we'll cover in a moment, but whichever format you choose, the goal is that the client can easily see where the money went—without needing a calculator.
2. Supporting Documentation
All relevant material receipts and subcontractor invoices. Think of this as the evidence behind every dollar charged. Organized backup builds confidence.
3. A Client Summary Update
Every invoice you send should be accompanied by a clear, high-level summary of where your client's budget stands. This isn't just a nice-to-have—it's the piece that ties everything together. The client summary shows how much has been spent to date, what's already been invoiced, and what remains in each cost group. It provides your client with the context they need to understand the invoice numbers without having to dig through spreadsheets or do the math themselves.
Together, these three pieces tell a complete, credible story: what you spent, what you spent it on, and where the job stands today. In the next section, we'll look at different ways to format this information so that it's not just accurate—but easy to digest.
The Different Structures of Cost Plus Invoices
A good invoice doesn't just list numbers—it tells a clear story. It shows what was spent, where it went, and how the project is tracking. But that only works if the structure makes sense to your client.
Not all invoice formats do that. Some confuse. Some overwhelm. Only one consistently delivers clarity and trust.
Here are the three most common formats—and why only one gets it right:
1. The Grocery List (QuickBooks)
When you build an invoice in QuickBooks, you can pull in individual expenses—but they drop in as raw line items. It's then up to the builder to manually organize everything by cost code (called Product/Service in QBO) to make the invoice readable. Without that extra effort, the result feels more like a grocery bill than a professional invoice.
Additionally, labor often appears as a lump-sum dollar amount, with no breakdown of who worked or how many hours were spent. Clients want to see the hours logged, not just the total cost. On a cost-plus project, where transparency is part of the deal, not showing this breakdown can raise doubt and erode trust.
2. The Cost Code Format (PM Software)
Some project management tools offer a step up by grouping charges under broader categories like framing, plumbing, or flooring. But they often don't separate labor, materials, and trades unless you've built out detailed sub-codes, which adds complexity. Syncing issues are common when these codes don't align perfectly between platforms, leading to gaps or mismatched data.
For clients, this format makes it harder to connect receipts or trade invoices to what's on the bill. Without a clear breakdown by cost type, the backup package becomes harder to follow—and what should feel transparent starts to feel murky.
3. Cost of Goods Method (Recommended)
This is the structure we recommend. Instead of organizing by cost code, it organizes by type of cost: labor, materials, and trades. This aligns with how clients intuitively think about construction spending.
Labor costs get broken out by hours and rate. Material costs are listed alongside receipts. Trade invoices are clearly labeled. It's simple, logical, and easy to cross-reference with the backup package. When paired with a clean client budget summary, it builds confidence and speeds up approvals.
How to Structure a Client-Friendly Cost-Plus Invoice
Now that you know what goes into a complete invoicing package—and you've seen the pros and cons of the three most common formats—let's break down the version we recommend.
This approach groups actual project costs under three clear categories: labor, materials, and trades. It's simple for your client to follow, easy to pair with receipts and invoices, and helps reduce friction around payments. When done right, this format not only clarifies how money is being spent, but it also reinforces the professionalism and transparency of your process.
1. Itemized Cost Breakdown
A recommended approach is to organize your invoice by the three key cost of goods categories, and include all actual project costs under each group so your clients can follow along and understand where their money is going. This also allows them to easily match the items on the invoice to the items in the receipts/invoices package you furnish in the invoicing package.
Labor
List the employees, their billable hours, and their hourly rates. This is also known as their Charge Rate, which is a marked Pay Rate.
The pay rate is what you pay your employees, including wages, benefits, taxes, and insurance. Your charge rate is the amount you bill the client, which includes not only those costs but also your overhead and profit markup.
It's important to be clear about this difference so your client understands that labor charges on a cost-plus invoice reflect the true cost of employing your team.
Materials
For materials, attach receipts from the places where you purchased supplies, whether that's big-box stores like Home Depot or Lowe's, or specialty vendors for items such as tile, flooring, and plumbing fixtures.
You can choose to list out each of these transactions or group these costs together into one line on the invoice. I used to group these, seeing as they were going to see the full backup documentation, and often the amounts were smaller.
Trades
Trades should be listed separately so your client can see exactly what each subcontractor is charging. Breaking these out makes it clear where their budget is going and shows that you're being transparent about third-party costs. These will also be combined with the digital copies of the material receipts to allow clients to cross-reference all of the costs on your invoice.
Breaking down costs this way not only organizes your invoice but also makes it easier for your client to follow along and match each charge to the supporting receipts and subcontractor invoices, reinforcing transparency by showing where their money is going. While the invoice focuses on actual costs incurred, pairing it with a client summary update gives your client the whole picture, including how spending compares to the original budget.
2. Markup/Fixed Fee
Your invoice should also clearly show the markup percentage or fixed fee you're applying to project costs. This transparency is critical in a cost-plus model so your client understands exactly how your compensation is calculated.
If you use a markup percentage, show the percentage and how it applies to the total costs. For example, if the project costs total $50,000, and your markup is 20 percent, the total invoice would be $60,000. You can choose to display this markup at the row level, grouped by cost of goods category, or as a single line at the invoice level.
I recommend doing this at the invoice level, as you should always be using the same markup for all three cost of goods. If you're using different markups, then you'll want to show this within each section (COGs) on the invoice.
Percentage-based markup is often the preferred method because it scales naturally with the project's size and complexity. As costs increase, your compensation adjusts in proportion, making sure you're covered for the extra coordination, management, and risk that come with larger or more detailed work.
For a fixed fee structure, break it down into predictable payments over the project timeline. For instance, on a $1,000,000 job with a $100,000 fixed fee spread over 12 months, you might bill bi-weekly at $3,846.15 per payment period. This approach is typically shown at the invoice level and provides a steady, agreed-upon payment schedule that's easy for your client to follow. But use extreme caution with this model, as we strongly discourage this.
Best Practices for Invoicing Cost Plus Projects
To make your invoicing process smooth and stress-free for both you and your client, follow these six best practices. They'll help ensure your invoices are clear, accurate, and delivered on a reliable schedule.
1. Track Costs in Real Time
Tracking direct costs in real time is essential for accurate, stress-free invoicing on cost-plus projects. With Buildwise, you can log labor hours, upload material receipts, and track trade invoices—all in one place.
Once those costs are in Buildwise, you can push your material and trade expenses directly into QuickBooks Online. For labor, Buildwise helps you organize and format billable hours so you can quickly input them into QBO using your charge-out rates.
From there, you can use QuickBooks' built-in billable expense feature to create your client invoice—bringing in each cost category and applying markup as needed. With everything tracked, organized, and ready to go, your invoice comes together fast and with full backup. The result? A clean, professional package that gives your client clarity and keeps your cash flow moving.
2. Invoice Regularly
For cost-plus projects, aim to invoice weekly. If that's not realistic, bi-weekly is acceptable—but monthly is too infrequent and creates cash flow and communication issues.
Sending invoices frequently helps you:
Maintain a steady cash flow so you're not waiting too long to get paid, and in turn, pay your trades.
Gives your client better control over the project by keeping them updated on costs as the work progresses, so that they can make informed decisions.
Reduce the chance that you'll miss billing for any costs, ensuring you capture every dollar you're owed.
Include not only project costs that have happened, but also upcoming trade or material deposits, so you're always front-loading the cash. This is critical to managing your cash flow on your projects because you should always be paid by your client first before paying out trades or expensive material orders like windows.
3. Use Clear and Consistent Formatting
Make sure every invoice you send includes key details like your client's information, the project address, and the invoice date. Keep your formatting clear so your client can easily understand what they're being charged for. Don't forget to include payment terms, such as the due date, along with a simple note explaining how to pay. Clear, consistent invoices help avoid confusion and speed up payments.
4. Include a Summary of Total Project Costs
Make it easy for your clients to understand how current invoices fit into the bigger budget picture. Include a summary that compares estimated costs, approved change orders, actual expenses to date, and what's remaining.
By showing what has been spent and what remains in each category, you give your clients real insight into the project's financial status. For example, you might say, "You have spent $75,000 of the $120,000 estimated framing cost." This transparency helps build trust and keeps your clients engaged and informed as the project moves forward.
5. Include Receipt and Trade invoice Documentation
Attach clear, organized receipts and trade invoices with every billing cycle. You've already grouped costs into labor, materials, and trades—now make it easy for clients to cross-reference charges with the supporting documents. This reinforces transparency and helps prevent disputes or delays.
Note: I don't recommend sharing timecards or timeclock reports with your client. Even if done with good intentions, it can invite unnecessary scrutiny. For example, if a project manager billed time to their job but wasn't physically onsite when the client stopped by, it can raise questions—even if that time was spent managing the job from another location. The invoice should reflect the true cost of delivering the project, not a granular accounting of where every hour was spent.
6. Be Transparent About Markup
When you apply a markup, be upfront with your client about what it covers. Explain clearly that the markup accounts for your overhead costs as well as your net profit. Using plain, straightforward language helps avoid confusion and builds trust.
For example, you might say something like, "Total project costs plus 20 percent," so your client understands exactly how you're calculating your fee. Being transparent about markup removes surprises and keeps your client confident in the billing process.
Common Mistakes to Avoid When Invoicing Cost Plus Projects
Invoicing on cost-plus projects can get tricky if you're not careful. Small slip-ups or missed details can slow down payments, frustrate clients, and cause headaches for you. The good news is, most mistakes are easy to avoid once you know what to watch out for.
In this section, we'll highlight five of the most common invoicing mistakes general contractors make when invoicing cost-plus projects and highlight how you can avoid them.
1. Not billing frequently or on a regular schedule
With cost-plus projects, part of your commitment is giving clients control over the budget and project direction. If you wait too long between invoices, your client might assume everything is on track and approve extra work without seeing the real costs. That can lead to surprises and frustration for both of you. Staying on a consistent invoicing schedule keeps your client informed, reduces stress, and helps prevent misunderstandings before they happen.
2. Failing to Attach Supporting Documentation
Your clients expect transparency, and that means showing them the receipts and trade bills behind the costs you're invoicing. Along with the detailed invoices, include a client summary that updates them on the current budget status. This helps them understand where the project stands and make informed decisions as work progresses.
If you don't include supporting documentation, it can raise doubts or suspicions about the charges. Clients may question your billing, slow down payments, or push back on costs, which can lead to frustration and delay your cash flow. Providing clear documentation keeps your clients in the loop and reduces the chance of disputes or questions down the line.
3. Underbilling for Administrative Time & Other Costs
Because cost-plus projects typically come with a lower markup, it is crucial to include every possible billable item in your invoices to protect your bottom line. This means you need to account for administrative time, such as the hours your bookkeeper or in-house financial staff spend preparing invoices and managing project costs. That time is part of the work required to keep the project running smoothly and should be billed accordingly.
Also, if you're using equipment your company owns—like scaffolding, trailers, or skid steers—you should still be charging rental fees for their use. Just because you're not paying a rental company doesn't mean the cost disappears. You had to purchase, insure, store, and maintain that equipment. If you were renting it from a third party, it would be a billable cost to the client, so the same logic applies here. Including these charges ensures you recover those costs and protect your margins.
Use a simple Tool Rental Form with your logo on it and detailing the rental rates. Also, make sure this is written into your construction agreement.
4. Using Manual Processes
One of the biggest risks in cost-plus projects is missing costs you have already paid for but forgot to bill.
When you rely on manual methods, such as spreadsheets, it is easy for things to slip through the cracks. Manual invoicing increases the chance of errors and takes up valuable time that could be spent managing the project.
Using a tool like Buildwise helps you stay organized by automatically tracking labor, materials, and trade partner bills. It ensures every cost is captured and included in your invoice. Buildwise can also handle the markup calculations, provide a PDF package of all material receipts and trade invoices, and has an automated client summary, thereby simplifying the entire billing process.
5. Keep It Simple—and Centralized
One common mistake builders make is overcomplicating the invoicing process by involving too many people or spreading the work across disconnected tools. When project managers, bookkeepers, admins, and owners all play a role without a clear system, things slip through the cracks—receipts go missing, invoices are delayed, and clients get confused. The most effective approach is to centralize your invoicing workflow and assign clear ownership.
This means that your project managers should be accountable for receiving, coding for project and cost code, all material receipts, and trade invoices. If you're still having all invoices land in an accounting@yourcompany email, it's time to shift this. This is how you solve the problem upstream and streamline the workflow.
Fewer hands, tighter systems, and a single source of truth lead to faster, cleaner billing.
Tools to Simplify Cost Plus Invoicing
Cost-plus invoicing works best when you have the right systems in place to stay organized and transparent. Using a combination of tools can help you track costs accurately, apply markup correctly, and present clear, professional invoices to your clients.
1. Buildwise
Buildwise is designed specifically to handle the challenges of cost-plus projects. It automatically tracks all your project costs and applies markup at the transaction level, so you never have to worry about manual calculations. Unlike other tools, it manages unbillable expenses properly to keep your invoices clean and accurate.
You can see labor, materials, and trade costs all in one place, with easy filtering to find exactly what you need. Buildwise also tracks which items have been billed already, helping you avoid missing costs or accidentally double-billing your clients. Plus, it integrates seamlessly with QuickBooks to ensure every expense is accounted for.
Learn more about how Buildwise can help you streamline your cost-plus remodeling or custom building business.
2. QuickBooks
QuickBooks is a reliable tool to keep your invoicing process professional and organized. You can use it to create and send invoices that clearly show costs and markup. It also helps you manage your Accounts Receivable by tracking who has paid and who still owes you, so you stay on top of your cash flow.
QuickBooks makes it easy to set up payment terms, send reminders, and apply late fees when needed. By keeping all of this in one place, you save time and reduce the chance of missed payments.
3. Google Sheets/Excel
If you prefer a simple approach, tools like Google Sheets or Excel can work for cost-plus invoicing. You can track project costs manually, organize them by category, and keep a clear record of what you need to bill. These spreadsheets also let you build straightforward invoice templates that you can customize for each client.
But be careful: as your project load increases, managing invoices manually can quickly become error-prone. It's easy to overlook a receipt, forget to mark something as billed, or break a formula that throws off your totals. Without built-in checks and automation, spreadsheets require constant attention to stay accurate—and the margin for error grows with each new job.
How to Communicate Cost Plus Invoices to Clients
Clear communication is one of the most important parts of making cost-plus projects work well for both you and your client. When you're upfront about how invoicing will work, you build trust, avoid surprises, and keep everyone on the same page throughout the project.
Start By Setting Expectations Early In The Sales Or Pre-Construction Process
Take time to explain how cost-plus invoicing works, including how you'll bill for actual costs plus markup or fixed fees. Show your clients a sample invoice and invoicing package, so they know exactly what to expect, including the level of detail and the supporting documentation you will provide. This helps them see that your approach is thorough and transparent from the start.
Be Proactive About Updates Once The Project Is Underway
Let your clients know that they will receive a project budget summary with every invoicing package, regardless of whether you bill weekly or bi-weekly. This regular communication keeps them informed about how costs are tracking against the budget, allowing them to make decisions about scope or priorities as work progresses.
Handle Questions Or Objections In A Calm And Professional Way
If a client questions why an invoice is higher than usual, explain that costs tend to ebb and flow depending on the stage of the project. Some billing cycles will be heavier—like when trades mobilize or large material orders hit—while others may be lighter during steady internal work like framing or drywall. If they ask about your markup, take the opportunity to clarify that it covers your overhead and a fair profit. Clear communication like this builds trust, reinforces transparency, and helps avoid payment delays.
The Bottom Line on Cost Plus Invoicing
Cost-plus projects can be a great way to deliver quality work while giving your clients the flexibility and transparency they want. But making that model successful depends on how well you handle your estimating and invoicing. Accurate, transparent invoices show your clients exactly where their money is going, help avoid disputes, and keep your cash flow steady.
Tracking costs in real time and billing on a regular schedule ensures you don't miss anything and keeps your clients informed throughout the entire project. And using the right tools, like Buildwise, can take the headaches out of this process by organizing costs, applying markup automatically, and bundling everything into a professional, easy-to-understand package.
Buildwise helps you stay on top of every project cost by organizing the labor, material, and trade expenses your team logs daily. It applies markup accurately, tracks what's been billed, and automatically generates clear summaries and supporting documentation. So when it's time to invoice, everything you need is already in place—turning a process that used to take hours into a 10-minute task. Want to see how Buildwise can simplify your cost-plus billing workflow? Book a demo today.
