🇺🇸United States

Overpaying contractors due to inadequate invoice auditing

1 verified sources

Definition

Where landlords or tenants do not systematically audit construction invoices linked to TIA, they risk paying for unperformed work, inflated materials, or non‑allowable costs. Industry guidance explicitly warns that invoices must be audited to avoid overbilling.

Key Findings

  • Financial Impact: Overbilling in construction has been documented in industry studies at several percent of project value; on TI budgets of $100,000–$500,000 this can translate to $5,000–$50,000 per project in excess payments.[8]
  • Frequency: Monthly during active construction and draw cycles
  • Root Cause: Manual review of paper/PDF invoices, lack of line‑item validation against agreed scope and rates, and absence of standardized approval workflows allow contractors’ errors or opportunistic billing to pass through unchallenged.[8]

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Leasing Non-residential Real Estate.

Affected Stakeholders

Property managers, Construction managers, Landlords’ accounting/AP teams, Tenants’ real estate and finance teams

Deep Analysis (Premium)

Financial Impact

$10,000-$40,000 per project (5-8% overbilling on $200k-$500k TIA for tech company office) • $10,000–$35,000 per expansion (tech vendors overbill; AR processes without full audit; cash recovery impacted) • $10,000–$35,000 per facility (2–5% on $300K–$500K; risk amplified by compliance penalties if invoice later fails audit)

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Current Workarounds

AR logs invoices in ERP or Excel; operations manager spot-checks work completion; paper sign-offs from site supervisor • AR logs invoices in QuickBooks; practice manager manually validates work completion via photos; email sign-offs • AR team tracks TIA receivables in Excel; invoices logged manually by store managers; regional FM spot-checks via email

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Forfeited tenant improvement allowance due to poor tracking

Common TIAs range from $10–$50 per square foot; for a 10,000 sq ft space this is $100,000–$500,000 of which a material share can be forfeited if deadlines or documentation are missed.[1][6][10]

Uncollected or delayed TIA reimbursements from landlords

Individual TI receivables often run into hundreds of thousands of dollars per lease; missed or long‑delayed payments can leave six‑ or seven‑figure balances outstanding across a multi‑site tenant.[3][5]

Budget overruns on tenant improvements from weak TIA expense tracking

For a TIA of $30–$50 per square foot on a 10,000 sq ft space ($300,000–$500,000), overruns of 10–20% are common in construction projects, equating to $30,000–$100,000 per build‑out.[2][6][8]

Rework and additional spend from non‑compliant improvements

Rework on commercial interiors frequently runs in the tens of thousands per location; for a mid‑size TI project, needing to redo 10–15% of work can cost $20,000–$75,000 plus potential loss of TIA reimbursement tied to the non‑compliant work.[1][6]

Delayed TIA reimbursements extending time-to-cash

For TIAs of $150,000 or more per lease, delays of 3–6 months in reimbursement represent a significant financing cost; the implicit cost of capital on these delayed inflows can reach tens of thousands annually for multi‑location tenants.[3][5]

Delayed openings and lost rent or sales from TI process bottlenecks

For retail or restaurant tenants with potential sales of tens of thousands per week per location, even a 4‑week delay can mean $100,000+ in lost revenue; landlords may lose comparable rent during delayed commencements.

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