What is Billings in Excess of Costs?

Billings in Excess of Costs, also known as overbillings, is a term predominantly used in the construction industry. It pertains to the scenario where a construction contractor has billed a client more than the work that has been completed to date. This condition occurs due to the timing difference between the recognition of costs incurred and revenue on contracts for long-term projects. The amount that is billed but not yet earned is represented as a liability on the contractor's balance sheet until the associated work is completed. This concept is a key part of construction accounting and helps manage cash flow throughout the life of the project.