Progress billing
Progress billing is invoicing a job in stages as work is completed, usually against a schedule of values, instead of billing one lump sum at the end.
Each invoice covers the work finished since the last bill. The client pays for progress, and the contractor keeps cash moving through a long job.
Example
On a $200,000 contract, a contractor completes the foundation and framing, about 40 percent of the schedule of values, and bills $80,000. The next bill covers the work finished after that point.
Common mistake
Billing by the calendar instead of by completion. Monthly invoices that ignore actual progress either run ahead of the work or fall behind it, and both create problems.
How to use it
Tie every invoice to approved lines on the schedule of values and bill promptly when a stage is complete.
Why contractors bill this way
Few contractors can fund months of labor and materials before seeing any cash. Progress billing spreads payment across the job, so payroll and supplier bills are covered by the work itself rather than by loans. It also gives the client visibility: each payment matches work they can walk through and verify, which makes approvals faster and disputes rarer.
The schedule of values
The schedule of values lists every part of the job with a price: site work, framing, rough-ins, finishes and so on. Each progress bill shows the percentage complete on every line, the amount billed to date and the balance remaining. Clients and lenders use it to check that payment follows real progress, so the schedule needs to be set up carefully at the start and kept current with any approved change orders.
Progress billing and retainage
Many contracts hold back a percentage of each progress bill as retainage until the job is finished. If you bill $80,000 with 10 percent retainage, you collect $72,000 and $8,000 stays held. Record the held amount as retainage receivable, not as cash you can spend. Our retainage glossary entry covers how to record and release it.
Keeping billing aligned with the books
Progress bills need to match the costs and percent complete in your records, or your work in progress schedule will not reconcile. When billing runs ahead of completion you are overbilled, and when it lags you are underbilled; both distort profit. Review billing against job costs every month, ideally right after the month is reconciled, while the numbers are fresh and corrections are cheap.