Progress Billing
Invoicing based on the percentage of work or project milestones completed.
Definition
Progress billing is an invoicing method where customers are billed based on the percentage of work completed or specific milestones achieved. Common in construction, engineering, and large-scale projects, progress billing ties payments directly to demonstrated project advancement.
Two main approaches exist: percentage-of-completion (billing based on work completed, often verified by a third party) and milestone-based (billing when specific deliverables are achieved). Progress billing contracts specify how completion is measured and what documentation is required.
Why It Matters
Progress billing aligns payment with value delivered, benefiting both parties. Service providers receive cash flow as they work rather than waiting until project end. Clients pay incrementally as they see results, reducing their risk of paying for work that never materializes.
The key challenge is accurately measuring progress. Disputes often arise when parties disagree about the percentage complete. Clear contracts with specific milestones or third-party verification reduce these conflicts.
Examples
- 1
A general contractor bills monthly based on percentage complete: if 25% of the building is constructed, they invoice 25% of the total contract.
- 2
A web development firm bills 30% at design approval, 40% at development completion, and 30% at launch.
- 3
An engineering firm uses certified progress reports from the client's project manager to determine billable progress each month.
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