Progress billing is how contractors get paid for work completed over the life of a project. Done right, it keeps cash flowing. Done wrong, it creates disputes and delays.
What is progress billing?
Instead of one invoice at project completion, you bill periodically—usually monthly—for the percentage of work completed during that period. This aligns your cash flow with your actual progress and is standard on commercial and large residential projects.
Creating a schedule of values
The schedule of values (SOV) is the foundation of progress billing. It breaks the total contract into line items with assigned values. Each billing period, you report the percentage completed for each line item. A well-structured SOV includes:
- Clear descriptions for each line item
- Values that total the contract amount
- Columns for scheduled value, completed to date, and prior billed
- Retainage percentage for each item
How retainage works
Retainage is a percentage (typically 10%) withheld from each payment until project completion. It protects the owner but ties up your cash. Track retainage carefully—it is your money, and you need to collect it at handover.
Best practices
- Submit billings on time—late submissions mean late payments
- Include detailed backup with photos and completed percentages
- Use progress billing software to automate calculations
- Track what is billed vs what is collected separately
- Follow up on overdue invoices immediately
Proper project budget tracking ensures your billings match actual progress, preventing disputes.