Overview

Progress billing lets you invoice for work in stages rather than all at once. This is common for larger projects where you need funds to cover materials and labor before the work is complete. It's also called milestone billing or installment billing.

When to Use Progress Billing

Progress billing makes sense for:

Large renovation projects
Multi-phase construction work
Long-term service contracts
Material-heavy jobs needing upfront costs
Projects spanning weeks or months

How Progress Billing Works

The Concept

Instead of one invoice for $10,000:

Invoice 1 (50% deposit):     $5,000
Invoice 2 (at 50% complete): $2,500
Invoice 3 (at completion):   $2,500
───────────────────────────────────
Total Project:               $10,000

Benefits

For you: Cash flow during the project
For customers: Spread payments over time
For both: Clear milestones and expectations

Setting Up Progress Billing

Planning the Schedule

Before starting, agree with your customer on:

Total project cost
Number of payments
When each payment is due:
- Deposit before starting
- At specific milestones
- Upon completion
Amount for each payment

Creating the Initial Estimate

Create a detailed estimate with all work
Include payment schedule in notes
Get customer approval on total and schedule
Keep estimate as reference

Creating Progress Invoices

Invoice 1: Deposit

Create new invoice
Add line item: "Project Deposit - 50%"
Amount: Deposit amount
Notes: Reference the project and total
Send for payment before starting work

Invoice 2+: Progress Payments

As milestones are reached:

Create new invoice
Add line items for work completed in this phase
Or add line item: "Progress Payment - Phase 2"
Notes: Describe milestone reached
Send when milestone is complete

Final Invoice

Create final invoice
Add remaining items or "Final Payment"
Verify totals match original estimate
Notes: "Final payment for [project]"
Send upon completion

Tracking Progress Invoices

Project Association

Keep progress invoices organized:

Link all invoices to the same project
Reference the original estimate number
Use consistent naming in descriptions

Running Total

Track payments received vs. total project:

Project Total:    $10,000
Invoice 1:        $5,000 (Paid)
Invoice 2:        $2,500 (Paid)
Invoice 3:        $2,500 (Open)
───────────────────────────────────
Received:         $7,500
Remaining:        $2,500

Best Practices

Be Clear Upfront

Document the payment schedule in your estimate
Get written agreement before starting
Explain the billing process to customers

Invoice Promptly

Send invoices when milestones are reached
Don't wait until end of project
Keep momentum with timely billing

Track Carefully

Know exactly how much has been billed and paid
Don't overbill by mistake
Keep final invoice amounts accurate

Communicate

Let customers know when to expect invoices
Notify them when sending
Follow up if payments are delayed

Tips

Set realistic milestones that represent real progress
Don't front-load payments too heavily (builds trust)
Consider requiring deposit before ordering materials
Document what work corresponds to each invoice
Keep the customer informed of project status

Common Questions

Q: What if the customer disputes a progress payment? A: Reference the original agreement. Document work completed at each stage with photos and reports.

Q: What if project scope changes? A: Issue change orders and adjust the billing schedule. Get approval for changes before proceeding.

Q: Can I require payment before continuing? A: Yes, this is common. Include "work pauses until payment received" in your terms.

Q: How do I handle leftover materials? A: Account for materials in appropriate invoices, typically when purchased or installed.

Q: What if final costs differ from estimate? A: For fixed-price projects, you absorb overages. For cost-plus, document changes and adjust final invoice with customer approval.

Progress Billing