24 terms that turn up on contracts, invoices, and payment applications, defined in the way a contractor would explain them to another contractor.
Retainage is a percentage of each construction progress payment withheld by the paying party until the project is substantially or fully complete.
Retainage typically ranges from 5–10% per progress payment, giving the customer or general contractor leverage to ensure work is completed satisfactorily before releasing the full contract amount. Average retainage differs by project type: about 7.59% on private projects, 5.56% on state projects, and 3.26% on federal projects, per Clemson University research summarized by Billed. Some states set statutory minimums or maximums — Texas, for example, requires a 10% minimum on private projects (Levelset — Retainage in Construction). Because retainage rules vary by state and project type, confirm applicable limits before signing a contract with a retainage clause.
A lien waiver is a legal document in which a contractor or supplier waives their right to file a mechanics lien for a specific payment received.
Lien waivers come in conditional and unconditional forms, and are commonly required by general contractors, lenders, or title companies as a condition of releasing payment. A conditional waiver only takes effect once payment actually clears, while an unconditional waiver takes effect immediately upon signing, regardless of whether payment has been received — signing the wrong type at the wrong time can waive rights unintentionally. Because lien waivers carry real legal consequences, have a construction attorney review your waiver forms and process. BCTM does not generate or file legal lien waivers, though it can export invoice and payment history that may support documentation alongside a properly prepared waiver.
A mechanics lien is a legal claim against a property that a contractor, subcontractor, or supplier can file when they haven't been paid for work or materials provided to improve that property.
Mechanics lien deadlines vary dramatically by state, ranging from 60 days in Ohio to 12 months in Louisiana, with most states falling in a 3-month-to-1-year range after work completion (Levelset — Deadlines for Construction Notices & Mechanics Liens in All 50 States). States also differ on the triggering event (last day of work, project completion, or a recorded Notice of Completion) and roughly 28% of lien claims are dismissed on procedural grounds, often due to missed deadlines. Filing a mechanics lien is a formal legal process that should be handled by a construction attorney or a specialized lien-filing service like Levelset, not attempted informally.
A change order is a documented amendment to a construction contract or estimate that adds, removes, or modifies work and its associated price, agreed to by both parties.
Change orders exist because job scope often shifts once work is underway — hidden damage, customer-requested upgrades, or site conditions that differ from initial assumptions. A proper change order describes the added or changed work, its cost impact, any schedule impact, and requires the customer's approval before the extra work begins. Without a documented change order, out-of-scope work is one of the most common sources of payment disputes in construction. BCTM lets you add a change order to an existing job as clearly labeled line items tied to the original estimate, with a digital approval step before work proceeds.
Progress billing is invoicing a customer in installments tied to project milestones or completion percentages, rather than billing the full contract amount only at project completion.
A typical progress billing structure includes a deposit before work begins, one or more milestone payments as phases complete, and a final payment upon completion (sometimes net of retainage). This protects both parties: the contractor isn't financing the entire project out of pocket, and the customer isn't paying in full before seeing progress. It's especially common on larger remodels, new construction, and commercial projects where the total job value and timeline justify staged payments. BCTM supports splitting a job into multiple milestone invoices tied to defined stages of work.
A draw schedule is the pre-agreed timetable and amounts for progress payments (draws) released over the course of a construction project, often tied to specific milestones.
Draw schedules are common on larger remodels and new construction, and are frequently required by lenders financing the project through a construction loan, where each draw is released only after an inspection confirms the corresponding phase is complete. A typical draw schedule might release funds at foundation completion, framing, rough-in, and final completion. Defining draw amounts and trigger events clearly in the contract upfront — rather than negotiating them as the project proceeds — reduces disputes about when each payment is actually due. BCTM lets you create multiple linked invoices for a single job tied to milestones you define upfront.
Markup is the amount added to a job's cost to determine its selling price, calculated as a percentage of cost: Selling Price = Cost × (1 + Markup%).
For example, a job costing $1,000 with a 30% markup sells for $1,300. Markup is frequently confused with margin, but the two are not the same number for the same job — margin is profit as a percentage of the *selling price*, not cost, so a 30% markup actually produces only a 23.1% margin. Contractors who set a markup percentage thinking it equals their margin percentage are earning less profit than they think, which is a common root cause of businesses that look busy but run short on cash. BCTM's price book lets you set cost and markup per line item, calculating the resulting margin automatically.
Margin is profit calculated as a percentage of the selling price, not the cost: Margin % = Profit ÷ Selling Price.
For the same $1,000-cost, $1,300-price job used to illustrate markup, the margin is 23.1% ($300 profit ÷ $1,300 selling price) — a lower number than the 30% markup used to set that price. Because markup and margin are never equal for the same job, converting a target margin into the correct markup requires the formula Markup % = Margin % ÷ (1 − Margin %); a 25% margin target actually requires a 33.3% markup. BCTM's price book displays both markup and resulting margin side by side when setting pricing, so the two figures don't get confused.
Labor burden is the total cost of employing a worker beyond their base wage, including payroll taxes, workers' compensation, and benefits.
Labor burden typically adds 25–50% on top of base wages, depending on trade and workers' comp risk class. Components include the employer's FICA share (7.65% of gross wages: 6.2% Social Security up to the wage base plus 1.45% Medicare), workers' compensation (which varies heavily by trade — illustrative examples put roofing around 7–15%, HVAC around 4–8%, and solar around 3–7% of payroll, per Subcontractor Hub), and benefits. Failing to include labor burden in pricing is a common reason contractors underquote labor costs. BCTM's price book can store a fully loaded, burdened hourly rate as a reusable line item; BCTM does not calculate or run payroll.
Overhead is the fixed cost of running a contracting business that isn't tied to any specific job, such as rent, insurance, vehicles, and software.
Because overhead exists regardless of which jobs you're working, it needs to be allocated across your pricing rather than ignored. A common method is totaling annual overhead costs and dividing by expected annual billable hours (or revenue), then building that per-unit figure into every price alongside labor and materials. Contractors who price only labor and materials, forgetting to build in overhead, are one of the most common causes of a business that stays busy but never accumulates real profit. BCTM's price book supports adding an overhead allocation into rates so it's factored into every job automatically.
ACH (Automated Clearing House) is a direct bank-to-bank electronic payment method that moves money from a customer's bank account to the contractor's without involving a card network.
Stripe's ACH Direct Debit rate is 0.8% per transaction, capped at $5.00, compared to the standard card rate of 2.9% + $0.30. Because of the flat cap, ACH becomes cheaper than card processing above roughly $625 per transaction — a $10,000 invoice paid by ACH costs a flat $5 versus roughly $290 in card fees (Stripe Pricing; FeeProbe Stripe ACH Fees analysis). ACH settlement can take slightly longer than card payments to fully clear. BCTM supports ACH payments alongside card payments via Stripe Connect.
A card surcharge is an additional fee added specifically for paying by credit card, intended to offset the merchant's card processing costs.
Surcharging is legal in most U.S. states as of 2026, but Connecticut, Massachusetts, Maine, and Puerto Rico prohibit it. Even where permitted, card network rules require advance disclosure to the customer and cap the surcharge at the merchant's actual processing cost, commonly cited near a 3–4% ceiling. Surcharges cannot generally be applied to debit card transactions under card network rules. Because state laws and network rules both apply and can change, verify current requirements before enabling a surcharge — this is a legal compliance question, not just a software setting.
A convenience fee is a charge for using an alternative payment channel, such as an online portal or phone payment, and typically applies regardless of card type, unlike a surcharge which applies specifically to credit cards.
Convenience fees are common in bill-pay portals, government payments, and tuition systems, and are regulated somewhat differently than card surcharges in many jurisdictions. Because a few states restrict card surcharging more tightly than convenience fees, some businesses in surcharge-restricted states use a properly structured convenience fee model instead — but the specific legal requirements for each fee type differ by state and should be confirmed before implementation, since simply relabeling a surcharge as a convenience fee does not automatically make it compliant.
A chargeback is a forced reversal of a card payment, initiated by the customer's bank at the cardholder's request, typically due to a dispute, fraud claim, or unauthorized transaction.
Unlike a standard refund initiated by the merchant, a chargeback is initiated through the customer's card issuer and can result in the transaction amount being pulled back from the merchant, sometimes along with an additional chargeback fee charged by the payment processor. Merchants can typically respond to a chargeback with evidence (invoices, signed estimates, message history) disputing the claim. Keeping detailed, itemized invoices and documented customer communication is one of the most useful things a contractor can do to strengthen a chargeback response if one occurs.
Net terms specify how many days a customer has to pay an invoice after it's issued, such as "net 30" meaning payment is due within 30 days.
Common net terms include net 15, net 30, and net 60, though "due on receipt" (no delay) is also widely used, especially for direct-to-consumer residential work. Longer net terms are more common in commercial and subcontractor relationships, where payment often flows through a general contractor's own billing cycle. Given that 82% of contractors reported waiting 30+ days past their expected payment date in 2024, shortening net terms — or requiring payment on receipt — is one of the more direct levers contractors have to reduce how long they wait to get paid.
A deposit, or down payment, is an upfront payment collected from a customer before work begins, typically to cover initial material costs and secure their commitment to the job.
Deposit amounts vary by job size and materials intensity, but common ranges are 10–50% of the total contract price, with material-heavy remodels often on the higher end. A 50% upfront deposit is a widely used convention for larger remodels, particularly ones requiring custom orders like cabinets or fixtures. Some states or municipalities cap deposit amounts for certain licensed home-improvement contracts, so check local rules before setting a large deposit requirement. BCTM lets you build a deposit requirement directly into an estimate or invoice and collect it online before scheduling the job.
An estimate is an approximate price for a job based on available information, which may be adjusted once the full scope of work is confirmed.
Estimates are typically used for residential and smaller commercial jobs, and are commonly understood by both parties as subject to change if the actual scope differs from initial assumptions. A well-built estimate itemizes labor and materials separately, includes an expiration date (commonly 30 days), and can be converted directly into an invoice once accepted. BCTM's estimate builder pulls from a saved price book for consistent, itemized pricing and converts an accepted estimate into an invoice in one step.
A quote is a firmer, itemized price for a job that a customer can formally accept, often treated as a more binding commitment than a casual estimate.
In everyday contractor use, "quote" and "estimate" are frequently used interchangeably, and there's no strict industry-wide rule distinguishing them. What matters most in practice is that whichever document the customer actually approves becomes the baseline the final invoice is checked against, regardless of which term was used. BCTM supports the full workflow from estimate or quote through customer approval to invoice, keeping line items consistent across every stage.
A bid is typically a firm price submitted to win a specific job, often in a competitive context where multiple contractors are bidding against each other.
Bids are more common on commercial and public projects, where a customer or agency solicits pricing from multiple contractors and selects one based on price, qualifications, or both. A bid usually implies more commitment to the stated price than a casual estimate, since the contractor is expected to honor it if selected. Win rates on bids vary enormously by trade, project size, and whether the bid is competitive or exclusive, so there's no single industry-wide benchmark — tracking your own win rate over time is generally more useful than chasing a general figure.
A purchase order (PO) is a document issued by a customer or general contractor authorizing a specific purchase or scope of work at an agreed price before it's performed or delivered.
Purchase orders are more common in commercial construction and supplier relationships than in typical residential contracting, where an accepted estimate usually serves the same authorizing function. When a PO is issued, referencing its PO number on your invoice helps the paying party match your bill to their own internal authorization and can speed up payment processing on their end, particularly with larger companies or government entities that require PO matching before releasing payment.
Form W-9 is an IRS form used to collect a person's or business's legal name, tax classification, and taxpayer identification number, typically gathered before paying a subcontractor.
Businesses generally collect a completed W-9 from subcontractors before or when payments begin, so they have the information needed to prepare a 1099-NEC at year-end if required. Best practice is collecting the W-9 upfront rather than scrambling for it at tax time, and keeping it on file even if the subcontractor ends up under the reporting threshold for that year. This is a tax compliance matter — confirm your specific filing obligations with a licensed CPA.
Form 1099-NEC is the IRS form businesses use to report nonemployee compensation paid to independent contractors and subcontractors above a set threshold.
As of 2026, the reporting threshold for 1099-NEC is $2,000, up from the previous $600 threshold, effective for payments made starting January 1, 2026 — the $600 threshold still applies to tax year 2025 returns filed in early 2026. Because this reflects a recent legislative change, confirm the current-year threshold with the IRS or a CPA before relying on it. BCTM does not prepare or file 1099 forms, but its reports can help track total payments made to a given subcontractor for your own preparation.
Form 1099-K is the IRS form third-party payment platforms (such as Stripe, PayPal, or Venmo) issue to report gross payment volume processed for a business above a set threshold.
As of 2026, the federal 1099-K threshold is $20,000 in gross payments AND 200+ transactions in a calendar year (both required), restored under the One Big Beautiful Bill Act signed July 4, 2025, applying to tax years 2025 and 2026 onward. Several states set their own, lower thresholds that override the federal figure — as low as $600 in Massachusetts, Maryland, Virginia, and Vermont, and as low as $100 in Rhode Island. Stripe issues 1099-Ks to BCTM's connected accounts per whichever threshold, federal or state, applies. BCTM does not prepare or file tax forms.
A price book is a saved list of a contracting business's services or tasks with pre-calculated, fully loaded prices, used to build estimates and invoices quickly and consistently.
A good price book prices each item fully loaded — labor (with burden), materials, overhead, and margin already built in — so pricing stays consistent across every job and every technician, rather than being calculated from scratch each time. This dramatically speeds up estimate creation and reduces the risk of underpricing, especially for repeatable services like flat-rate plumbing repairs, HVAC tune-ups, or per-square-foot painting rates. BCTM's price book feature lets you save these fully loaded prices once and pull them into any estimate or invoice with a tap.