What is Progress Invoicing and When Should You Use It?

As your contracting business grows, so does the size of your projects. Instead of wrapping up in just a few days, projects can take weeks, months or even years to complete.

When these larger projects start to become your norm, your business is probably at a point where it has outgrown a bill-as-you-go system. In fact, getting paid for larger and longer projects altogether can be more difficult and confusing than what you’re used to.

So, how do you manage the billing process as your contracting projects continue to grow?

If you’re new to the concept of progress invoicing—sometimes called progress billing—we can get you up to speed on everything you need to know.

In this article, we’ll go over what progress invoicing is, when it can be the right billing solution for your business, and how you can use it to improve your cash flow.

Let’s get started.

What Is a Progress Invoice?

A progress invoice is a method of invoicing that breaks a project fee into smaller increments. At certain project milestones, your customer pays a portion of the overall fee. In effect, they make multiple partial payments.

How are these milestones identified? It depends on your business and the project.

For example, if you do bathroom remodeling, the milestones could be demolition, framing, drywall and insulation, and other major component completion through finishing.

Or let’s say your company was hired for a new residential build project with a six-month timeline. Milestones for this project could be based on that timeline with a portion of the bill due when work begins, at the three-month mark, and at completion.

You and your customer will agree on a project timeline, the milestones, and how much they’ll pay at each increment. Many service providers also request a deposit from customers before work begins.

For a bathroom remodeling with a total project fee of $35,000 you might agree to six installments structured like this:

Payment breakout

10% first payment

20% second payment

20% third payment

20% fourth payment

20% fifth payment

10% sixth payment

100%

Milestone

Rough plumbing/ electrical