Progress billing means invoicing clients at intervals throughout a project instead of waiting until completion. For contractors, this isn’t optional. It’s how you avoid financing jobs out of pocket and keep cash flowing while work is underway.

The foundation is your schedule of values. Before work begins, break the project into line items with dollar amounts assigned to each. This could be by phase (demo, rough-in, finish), by trade, or by milestone. The total adds up to your contract amount. This document becomes the basis for every progress bill you send and should be part of your contract.

Two methods work for most contractors. Percentage completion billing means you estimate how much of each line item is done and bill accordingly. If framing is 60% complete and that line item is $20,000, you bill $12,000 for framing that period. Milestone billing is simpler. You bill a fixed amount when specific milestones are reached, like “foundation complete” or “rough inspection passed.” Milestones are easier to verify but less flexible for longer projects.

Retainage complicates things. Most commercial contracts and many residential ones hold back 5-10% until final completion or even longer. Your books need to track retainage separately from billed amounts. That $12,000 framing bill might only put $10,800 in receivables with $1,200 going to retainage held until project closeout. Miss this distinction and your financials won’t reflect what you’re actually owed.

Documentation matters more than most contractors realize. Keep records of what work was completed for each billing period. Photos, daily logs, inspection sign-offs. When a client disputes a bill or asks for detail, you need proof. When your CPA asks how you recognized revenue, you need records that match your invoices.

Your bookkeeping system should tie progress billing to job costing. Each payment received should post against the correct job so you can see cash collected versus costs incurred. Without this connection, you can bill $50,000 and spend $60,000 on a job without knowing you’re underwater until it’s too late.

Send progress bills on a regular schedule. Monthly works for most projects, or at defined milestones for shorter jobs. Include backup documentation showing what’s complete and give clients enough time to review and process payment before you need the cash for payroll or materials.

Common mistakes include billing too infrequently, failing to track retainage separately, and not reconciling billed amounts against actual costs. Some contractors bill aggressively early to get cash in the door, then find themselves in disputes when clients feel they’ve overpaid for work completed. The numbers have to match reality.

If your current system doesn’t connect billing to costs by job and phase, you’re making decisions without the full picture. Professional bookkeeping services in MetroWest can help structure your chart of accounts so progress billing, costs, and profitability all line up the way they should.