Progress Billing: Definition, Benefits, Steps and Tips

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If you’re using QuickBooks Online for your small-business accounting needs, you’ve likely successfully created invoices for your clients. However, sometimes one invoice at the end of a project isn’t the best way for you to be compensated for your work. In that case, QuickBooks progress invoicing may be the solution. This guide will explain the process and provide step-by-step instructions for how to turn on — and successfully manage — progress invoicing in QuickBooks Online.

Progress billing is an invoicing method that provides for a regular payment cadence throughout a large-scale, long-term project. Companies bill customers on a predefined timeline based on completion of milestones. The method is most commonly used in construction.

Pros & Cons of Progress Billing

What do you include in progress billing?

Typically, progress billings are most conclusive when they include items that the contractor and client agree upon before any kind of work begins. This is likely to vary depending on the specific project and funding needs. There are some common items to include, such as:

What is progress billing?

Progress billing is an invoice system where a client submits their periodic payments to the contracting business up to the current date. A business prepares and submits multiple progress billings, each at different points throughout the life cycle of a critical assignment. This type of billing system is common for long-term or big budget projects because it allows the company or contractor to fund the project continuously. Since the contractor bills their client incrementally throughout the entire project, they have to agree upon a definitive payment schedule, ensuring the client has the means to pay it each time.

Why is progress billing beneficial?

There are many benefits to using progress billing, including:

How to use progress billing

Here are four steps to help you use progress billing:

1. Negotiate the original contract

Set up a meeting with the client to discuss and negotiate the cost for the initial contract. This represents the total billable amount for the entire project. You can also use this stage to determine the payment frequency, the method for transferring those funds and other basic billing terms.

2. Develop a progress timeline

The next step is to create a timeline for the assignment or project. Segment your project into various stages, from inception to completion, using percentages. Also, identify any time, resources, information and materials that you need to complete each stage. These elements factor into the payment plan later.

3. Determine the progress milestones

Identify each milestone that you reach within the project and then align that to a specific progress percentage. For example, if there are four milestones within a project, each milestone represents 25% project completion. If you correlate each milestone to the payment plan, the customer pays 25% at each progress point, culminating in a final payment at the end of the project.

4. Issue the progress billing invoices

Once you start working on the project, you can begin issuing the progress bills incrementally. Review how the project is progressing and address any changes in the scope of the work by altering the billing invoice to fit the new project adjustments. Finalize the project and then receive the payment to conclude the last progress transaction.

Tips for using progress billing

Here are a few additional tips to help you use progress billing:


What is a progress billing?

If you’re interested in progress billing, here’s how to implement the process:
  1. Negotiate the Initial Contract. …
  2. Create a Progress Timeline. …
  3. Identify Progress Milestones. …
  4. Issuing Progress Invoices. …
  5. Confirm Ongoing Completion of Work. …
  6. Address Changes in the Scope of Work. …
  7. Finalizing the Project.

What is progress billings to date?

Typically used for large-scale construction projects, progress billing is a type of invoice that bills for work completed along the way. Instead of invoicing at the end of a project, progress billing occurs incrementally as the project advances.

Is progress billing a liability?

Progress billings are invoices that are submitted for work completed to date on a lengthy project. Progress billings are primarily used for long-term projects that often come with large budgets.

Why would you use progress invoicing?

Progress billings on accounts

Progress billing on Construction Contracts is offset against the construction in progress account. The excess of the billings exceeding the construction costs would be reported in the Current Liability section in the balance sheet.

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