A backcharge is an accounting of costs for something that had to be provided because of the subcontractor.

For example, when subs do not clean up after completing a job, you must use your own resources to perform the cleanup. The costs incurred are backcharged to the subcontractors, reducing the amount paid to them.

Backcharges are unique in that they are kept separate and treated differently from other subcontract items. The same net effect (reducing the amount owed to the sub) can be generated by entering a negative change order. However, treating backcharges as negative change orders can create legal concerns as to whether the contract has been fully paid.

Backcharges are set up in SL Subcontract Entry, using the Backcharge transaction type. Although backcharge items do not impact the Original or Current totals on the subcontract, a cost (typically negative) may be assigned to the item once the backcharge amount has been determined. This action is not required because the invoice can be posted against the item without a defined amount, but may be used primarily as a way to update AP with the amount taken. To use this option, define the job, phase and cost type that incurred backcharge costs will be posted to in other accounting modules. Typically, the assigned phase should be a unique, separate phase code.

The SL Backcharge Detail report accesses Job Cost, pulls all costs posted to backcharge phases, and displays the actual costs incurred. Use these totals to post a negative payables transaction in AP Transaction Entry to reduce the payment to the sub. This negative transaction does not affect the subcontracts Original or Current totals, but will reduce the subcontracts Net Invoiced total.

Click here for instructions on how to process backcharges.