Running account bills, and what "running" means

A running account bill is an interim payment claim on a construction contract. Work is done over months or years, and nobody waits until the end to be paid, so the contractor bills periodically for what has been done so far.

The word doing all the work is running. An RA bill is not a bill for this month's work. It is a restatement of the entire job to date, from which everything already certified is subtracted.

That distinction is the source of most of the confusion around these documents, and it is worth being precise about, because the two framings produce different numbers as soon as anything is revised.

The shape of the arithmetic#

For each item in the bill of quantities:

• Cumulative quantity executed to date
• Times the agreed rate
• Equals cumulative value of that item

Sum across items to get gross cumulative value. Then, at the foot:

• Less cumulative value certified in previous bills
• Equals gross value of this bill
• Less retention on this bill
• Less recovery of advance
• Less statutory deductions
• Less any set-off
• Equals net payable now

Every line above the "less previous" is cumulative. Everything below it is about this payment.

Why cumulative rather than periodic#

Because measurement is not exact, and revision is normal.

Suppose last month you certified a quantity that turns out, on remeasurement, to have been overstated. Under a cumulative system, this month's bill simply shows the corrected cumulative figure; the "less previous" line does the rest, and the correction flows through automatically as a smaller payment now. No credit note, no negative bill, no argument about which month the error belongs to.

Under a periodic system you would need an adjustment entry against a closed period, and construction contracts generate enough of those to make it unworkable.

The cost of the cumulative approach is that everybody has to hold two numbers in their head for every line, and people routinely quote the wrong one.

Where cumulative bills break#

Item codes changing. The whole structure depends on this bill's item three being the same item as last bill's item three. Renumber the schedule midway — because scope was added, because somebody reorganised the spreadsheet — and every cumulative comparison silently becomes meaningless. The bill will still add up. It will just be adding up different things.

Rates changing. If a rate is revised, does the revision apply to work already certified at the old rate, or only to work going forward? Both are defensible, contracts say different things, and the answer must be decided once and recorded, because a cumulative structure applies the current rate to the cumulative quantity by default — which silently reprices work that was already paid for.

Variations and extra items. Work not in the original bill has to enter the structure somewhere. If it goes in as a lump sum at the bottom, it is outside the cumulative machinery and behaves periodically, and now the document has two different logics in it.

Negative movement. A cumulative quantity can go down. Most systems and most people handle this badly. A bill whose net comes out negative is arithmetically correct and organisationally impossible, and what usually happens is that somebody holds it back until the next bill covers it — at which point the records no longer describe events in the order they happened.

The deductions are not one thing#

The lines below the gross figure are usually collapsed into a single "deductions" total on the summary page. This is convenient and it destroys information.

Each deduction has a different future:

• Retention will be released later. It is a balance, and it needs a running total per contract. Its own mechanics are in retention money.
• Advance recovery is repayment of money already handed over. It reduces an outstanding balance which must reach zero by a defined point.
• Statutory deductions leave your hands entirely and are remitted elsewhere. They are not yours to negotiate about.
• Set-off is money the other party owes you being netted against money you owe them, and it has its own consequences — set-off covers them.
• Disallowance — work not accepted — reduces the contract value permanently and should say why.

Five different characters. If your certificate shows one number, then six months later nobody can reconstruct what was held and what was lost, and the final account becomes a negotiation about history rather than a calculation.

Certification is a separate act from billing#

A contractor submits. Somebody measures, checks and certifies. Those are different acts by different people, and an RA bill has three distinct quantities per line — claimed, measured, certified — which are not always the same.

Systems that store one quantity per line cannot represent a disagreement, which means the disagreement happens somewhere outside the system, usually in a meeting, and the record shows only the outcome. The contractor's file and the employer's file then contain different histories of the same project, and at final account time both are produced as evidence.

Storing all three costs one column. It is the cheapest dispute-avoidance measure available on a construction contract, and from the contractor's end it is also what stops a correct bill sitting unpaid — getting paid on time.

The final account#

Every RA bill is provisional. The final account is where the cumulative quantities become final, retention release begins, and everything held or disputed is settled.

The quality of that exercise is decided years earlier, by whether the interim bills kept their structure. A project whose item codes stayed constant, whose deductions were itemised, and whose claimed, measured and certified quantities were all recorded can produce a final account by arithmetic.

A project without those things produces one by negotiation, and negotiation favours whoever kept better records, which is a polite way of saying it favours whoever the other side cannot contradict.

The short version#

An RA bill restates the whole job and subtracts what was already certified. That is what makes corrections easy and what makes item codes sacred.

Keep the codes stable, keep the deductions itemised, record claimed and certified separately, and the final account becomes a calculation instead of an argument.