How to verify a subcontractor progress claim before you pay it

Short answer

1. Match each claim line to the contract, the PO or an approved variation.
2. Confirm the work is done and total all earlier claims.
3. Check it is a valid tax invoice and the ABN and bank details are right.
4. Approve it in Xero or MYOB and record what you hold back.

Before you start

Have the contract or purchase order open. Have the list of earlier claims for this job. Have the site manager’s note on what is complete. If any of the three is missing, stop and ask for it.

The checklist

1. Contract or PO. Every line on the claim should be an item in the contract, on the PO or on a signed variation. A line that is not on any of them needs a name next to it before you pay.

2. Work done. A claim for 60 percent of the framing needs someone who has seen the framing. Get the site manager’s sign-off in an email or in the bill notes. Do not rely on memory.

3. Earlier claims. Add up every earlier claim on the job. The new claim plus earlier claims must not go over the contract value. This is the check people skip, and it is where overpayment happens.

4. Tax invoice. The ATO says a tax invoice for a sale under $1,000 needs seven details, and one for $1,000 or more also needs the buyer’s identity or ABN (ATO: Tax invoices). You need a tax invoice to claim a GST credit on a purchase over $82.50 (ATO: When you can claim a GST credit). Our guide How to check a tax invoice has what the ATO needs lists all of them.

5. ABN. Look it up on ABN Lookup. Check the status is active and whether it shows GST registered. A subbie charging GST without a GST registration is a red flag.

6. Bank details. Compare the BSB and account number with your supplier record. A changed account on a claim should be confirmed by phone, using a number you already hold.

The manual way in Xero

1. Go to Business > Bills to pay and choose New bill.
2. Pick the subcontractor and enter the date, due date and claim number.
3. Add a line for each claim item. Use one account for subcontract costs.
4. Put the earlier claim total and the retention in the Reference field or a note, since Xero has no progress claim field.
5. Save as draft, check, then submit for approval or approve.

Limits. Xero does not compare a bill to the contract or to earlier claims. It checks nothing about the ABN. You do the sum yourself.

The manual way in MYOB

Enter the claim as a bill under Purchases. Add the lines, allocate them to the job and keep the earlier claim total in the memo. MYOB does not compare a bill to the contract either.

The Pulsify way

1. Raise the contract value as a purchase order in Xero, or sync your existing PO.
2. Forward the claim to your Pulsify address. Pulsify reads every line and links the invoice to the open PO.
3. Pulsify matches each claim line to a PO line and flags lines that bill more than ordered, are priced differently or are not on the PO. It handles partial and progress claims.
4. The PO panel shows how much is claimed, what this claim adds and what is left.
5. Pulsify checks the ABN and flags a changed BSB or account number. Approve in Pulsify and the bill is created in Xero or MYOB.

Matching works in Xero and MYOB, but raising a PO inside Pulsify is Xero only.

Worked example

Example Concrete Pty Ltd has a $48,000 contract for slabs. Claim 3 is for $14,400 ex GST. Claims 1 and 2 were $9,600 and $16,800, so $26,400 was paid.

$26,400 plus $14,400 is $40,800, which is under $48,000. The claim passes the cap. The site manager confirms the second slab is poured. The ABN is active and GST registered. The BSB matches. You approve the claim, add $1,440 of GST and pay $15,840.

Common mistakes

• Paying a claim that is a rounded percentage of the whole contract with no line detail.
• Forgetting a variation that was agreed by phone. Ask for it in writing before you pay.
• Approving the claim and tax invoice as two documents, then paying both.

Next step

Try an invoice at app.pulsify.tech/sign-up. Or book a call to find out how customers have saved hours per week after switching.

See the PO matching guide, the progress claims glossary entry and the free construction invoice compliance checker. The retention schedule calculator helps with the hold-back sum.