RA bills, retention and advances: getting construction billing right

For most Indian contractors, cash flow is decided less by how fast work happens on site and more by how cleanly it is billed. A running account (RA) bill that is late, over-claimed or poorly supported gets held at the client’s end. A retention amount that nobody tracked is still sitting with the client two years after handover. An advance that was recovered twice, or not at all, turns up as a dispute at final bill.

This article walks through how RA billing, retention and advances work, where the usual errors creep in, and how a system can keep each bill tied to the contract.

What an RA bill is

An RA bill is an interim bill raised during the project for work done up to a date. It is “running” because each bill builds on the previous one. The standard approach is cumulative:

• Measure the total quantity executed to date for each BOQ item.
• Subtract the quantity already billed in previous RA bills.
• The difference is this bill’s quantity, priced at the contract rate.

Working cumulatively is what keeps RA billing honest. If a quantity is over-measured in one bill, it shows up as a negative or reduced figure in the next, instead of being lost.

Measurement and certification

Measurements are usually recorded in a measurement book or sheets agreed with the client’s engineer or consultant. The client then certifies the bill, sometimes at a lower quantity than claimed. The certified amount, not the claimed amount, is what gets invoiced and paid, so a contractor needs to see both.

The over-billing problem

The commonest RA billing error is claiming more than the contract allows. It happens in a few ways:

• Cumulative quantity for an item exceeds the BOQ quantity, without an approved variation.
• An item is billed that is not in the contract BOQ at all.
• A previous bill’s quantity was not carried forward correctly, so the “this bill” figure is inflated.

Clients’ engineers catch most of these, and when they do, the whole bill tends to slow down. Catching them before submission is far cheaper. If quantities genuinely exceed the BOQ, the right route is a change order or variation, priced and approved, which then updates the contract.

Retention

Retention is a percentage of each bill that the client withholds as security for performance and defects. It is set in the contract and is usually released in parts: some on completion or handover, the balance after the defect liability period ends.

The trouble with retention is not the calculation. It is the memory. Across many bills and several projects, the total retained can be a large sum, and it is released only when someone asks for it with the right paperwork. A retention register per project, showing amount held, amount released and the date each release falls due, is what stops it being forgotten.

Advances and their recovery

Many contracts include a mobilisation advance, and some include advances against materials brought to site. Both are recovered from subsequent RA bills, typically as a percentage of each bill until the advance is fully recovered.

Errors here are usually about tracking:

• Recovery continuing after the advance is fully recovered.
• Recovery starting late or skipped in a bill.
• Different people calculating recovery differently from bill to bill.

The fix is to hold the advance terms on the contract and calculate recovery from them every time, with the outstanding balance visible on each bill.

Other deductions

An RA bill can carry several other deductions:

• Liquidated damages (LD) where the contract allows them for delay.
• TDS under Section 194C of the Income-tax Act on payments to contractors.
• TDS under GST (Section 51 of the CGST Act), which applies when the client is a government department or other notified body.
• Recoveries for materials or services supplied by the client, where agreed.

Each deduction should be visible on the bill so that the net payable can be reconciled with what actually arrives in the bank.

GST on RA bills

A GST tax invoice is raised against the certified bill. Two points deserve care:

• Place of supply for construction services related to immovable property is generally the location of the property, that is, the site. That decides whether CGST and SGST or IGST applies.
• Taxable value. Retention and advance recovery are part of the contract consideration, so GST is typically computed on the gross certified value rather than the net amount after these deductions. Treatment of advances, client-supplied material and specific contract structures can vary, so agree the approach with your tax advisor and apply it consistently.

A worked layout

The table below shows the shape of a typical RA bill summary. The figures are illustrative only.

Line	Amount (₹)
Value of work done to date (cumulative, certified)	48,00,000
Less: value billed in previous RA bills	30,00,000
Value of this bill	18,00,000
Add: GST on this bill	per applicable rate
Less: retention (as per contract)	contract % of this bill
Less: mobilisation advance recovery	contract % of this bill
Less: TDS (income tax, and GST TDS where applicable)	as applicable
Net payable	balance

Seeing the cumulative figure, the previous-billed figure and every deduction on one page is what makes a bill easy for the client to certify and easy for your accounts team to reconcile.

A billing routine that holds up

1. Lock the contract terms at award. Retention percentage, advance amount and recovery rate, defect liability period and LD terms should be recorded once, when the contract is awarded.
2. Measure cumulatively against the contract BOQ. Never bill an item that is not in the BOQ without an approved variation.
3. Check for over-billing before submission, item by item.
4. Record what the client certifies, and invoice the certified amount.
5. Apply deductions from the contract terms, not from memory.
6. Keep a retention register and diary the release dates.
7. Allocate receipts against invoices so outstanding amounts by client are always current.

Where Zaptiz fits

Zaptiz Construction keeps billing on the same record as the contract. At award you set retention, advances, defect liability and LD terms. RA bills are measured cumulatively against the contract BOQ, with an over-billing guard and a certification step. Deductions cover advance recovery and LDs, and a retention register supports partial or full release. GST tax invoices are raised from certified bills with the site as the place of supply and TDS fields included, and payments are allocated against invoices in a company-wide register.

An RA Bill Drafting agent can prepare the next bill’s quantities with the over-billing check applied; a person reviews and confirms it. Invoices and RA bills can be sent by email or WhatsApp, with a pay link on invoices.

For a step-by-step walkthrough, read Running RA bills in Zaptiz Construction. For the cost side of the same project, see Controlling project cost with budgets and a live cost ledger. Zaptiz Construction is priced to your users and projects, so contact sales for a quote or book a demo.