Progress Billing: Percent Complete vs Milestone (Examples)

Quick answer: Progress billing is a way of invoicing a long project in stages instead of in one bill at the end. You either bill for the percentage of work completed in each period (percent-complete billing) or bill a set amount when a defined milestone is reached (milestone billing). Each progress invoice shows the contract value, work billed to date, any retainage and the amount due now.

Progress billing is standard in construction, engineering and manufacturing, and increasingly common for agencies, developers and consultants working on large fixed-fee projects. It keeps cash flowing during the job and gives the customer clear checkpoints. This guide explains both methods, the documents involved (schedule of values, pay applications, change orders, retainage), a full worked example and the mistakes that delay progress payments.

What is progress billing?

Progress billing (also called progress invoicing or interim billing) splits the total contract price into a series of invoices tied to work performed. Instead of carrying all costs until completion, the contractor or service provider gets paid as value is delivered. The customer, in turn, only pays for work they can see.

A progress invoice is different from a deposit invoice, which is billed before work starts, and from a partial payment invoice, which records the customer paying part of a single invoice. Progress billing is a planned sequence of invoices against one contract.

Percent complete vs milestone billing

	Percent-complete billing	Milestone billing
How the amount is set	% of each line item finished this period	Fixed amount per agreed event
Billing timing	Regular cycle, usually monthly	When each milestone is reached
Best for	Construction, long builds with many trades	Fixed-fee projects with clear deliverables
Main document	Schedule of values and continuation sheet	Payment schedule in the contract
Advantage	Cash flow matches work closely	Simple to explain and verify
Risk	Disputes over percentages	Long gaps without cash if a milestone slips

For deliverable-based work outside construction, see our guide to milestone payments. For construction pay applications using the industry-standard forms, see AIA G702 and G703 billing.

How does percent-complete progress billing work?

1. Build a schedule of values

The schedule of values (SOV) breaks the contract sum into line items, for example site work, foundations, framing, electrical, plumbing, finishes. The line values must add up to the contract sum. The owner or architect usually approves it before the first invoice.

2. Measure progress each period

At each billing date, estimate the percentage complete for every line, based on quantities installed, hours spent against budget or physical inspection.

3. Calculate work completed to date

Line value x percent complete = value of work completed to date. Add materials stored if the contract allows.

4. Subtract retainage and previous billings

Many contracts hold back a percentage, often 5% or 10%, as retainage. Amount due this period = total completed and stored to date, minus retainage, minus amounts previously billed.

5. Attach support and submit

Include change orders, lien waivers and stored material backup. Submit by the contract's pay application date.

Worked example: a $120,000 remodel billed by percent complete

A contractor has a $120,000 contract with 10% retainage. Previous billing (application #1) totaled $30,000 of completed work, so $27,000 was billed after retainage. Here is application #2.

Line item	Scheduled value	% complete to date	Completed to date
Demolition and site prep	$10,000	100%	$10,000
Framing and structural	$25,000	100%	$25,000
Plumbing rough and finish	$15,000	60%	$9,000
Electrical rough and finish	$14,000	50%	$7,000
Drywall and paint	$16,000	25%	$4,000
Cabinets and countertops	$28,000	0%	$0
Flooring and trim	$12,000	0%	$0
Total	$120,000	45.8%	$55,000

Summary	Amount
Total completed to date	$55,000.00
Less 10% retainage	-$5,500.00
Total earned less retainage	$49,500.00
Less previous billings	-$27,000.00
Current payment due	$22,500.00
Balance to finish, including retainage	$70,500.00

The balance to finish ($120,000 minus $49,500 earned less retainage) shows the owner how much remains, including the $5,500 retainage that will be released at completion.

Worked example: milestone billing for a software project

A developer quotes a fixed $36,000 for a customer portal and agrees this schedule:

Milestone	%	Invoice amount
Contract signed and kickoff	20%	$7,200
Designs approved	20%	$7,200
Beta delivered to staging	35%	$12,600
Launch and acceptance	25%	$9,000
Total	100%	$36,000

Each milestone invoice should reference the contract, name the milestone, show the amount billed to date and the remaining balance. That makes approval quick for the client's finance team. You can set each milestone up as a line in our free invoice generator and add a note showing billed to date and balance remaining.

What should a progress invoice include?

• Invoice number, date, due date and the project name, address and contract or PO number.
• Application or billing period number (for example, "Progress billing #3, period ending October 31, 2026").
• Original contract sum, approved change orders and revised contract sum.
• Work completed this period and to date, by line item or milestone.
• Stored materials, if billed.
• Retainage held to date.
• Previous billings and the current amount due.
• Balance to finish.
• Payment terms and remittance details.

Our construction invoice guide and contractor invoice template show these fields laid out. For trade-specific layouts, see the remodeling invoice template and the subcontractor invoice template.

How to handle change orders in progress billing

Approved change orders adjust the contract sum. Add each one as its own line on the schedule of values (or summarize them in a change order section) so its progress can be billed separately. Do not bill unapproved change orders as part of the contract; list them as pending in a cover note instead. Owners reject pay applications that mix the two.

Progress billing checklist

1. Agree the method (percent complete, milestones or a mix) in the contract.
2. Agree the billing date, approval process, payment terms and retainage rate.
3. Get the schedule of values or milestone schedule approved before work starts.
4. Track progress with evidence: photos, quantities, timesheets.
5. Prepare the invoice with to-date figures, not just this period's work.
6. Attach change orders, lien waivers and stored material support.
7. Submit on time and follow up on approval.
8. Reconcile payments received against each application.

How does progress billing affect cash flow and accounting?

Progress billing exists because long projects create a cash gap. A contractor pays crews weekly and suppliers on 30-day terms, but the owner might not pay a pay application until 30 days after approval. Without progress invoices, the contractor would carry the entire project cost until handover.

Cash flow example

Take the $120,000 remodel above, built over four months with costs of about $105,000 spread evenly ($26,250 a month). If the contractor billed only at completion on net 30, it would be out of pocket the full $105,000 for up to five months. With monthly progress billing and 10% retainage, the maximum cash gap shrinks to roughly one month of costs plus retainage. That is the difference between needing a large credit line and needing a small one.

Overbilling and underbilling

Accountants compare what you have billed with the revenue you have actually earned on the job (usually measured by costs incurred against total estimated costs):

Situation	What it means	Balance sheet effect
Billings exceed earned revenue	Overbilled: the customer has paid ahead of the work	Contract liability
Earned revenue exceeds billings	Underbilled: you have done work not yet invoiced	Contract asset

Persistent underbilling usually means you are slow to invoice or the schedule of values is back-loaded. Persistent overbilling can hide a job that is losing money. Lenders and bonding companies look closely at both, so review a work-in-progress schedule monthly. Our guide to cash flow management covers the wider picture.

Progress billing outside construction

The same principle works for any large job with a long timeline:

• Agencies and studios: branding or website projects split into discovery, design, build and launch stages.
• Software development: sprints or releases billed on acceptance, often with a statement of work defining each milestone.
• Manufacturing and fabrication: custom equipment billed at order, at factory acceptance test and at delivery.
• Consulting: phased engagements with a fixed fee per phase.
• Events: planners billing a booking fee, a mid-point payment and a final balance.

Outside construction there is usually no schedule of values or retainage, but the invoice should still show the total project fee, amounts billed to date and the remaining balance. That running total is what makes a progress invoice easy to approve. If the client also reimburses costs, add them as separate lines following our reimbursable expenses invoice guide.

Common progress billing mistakes

• Front-loading heavily. Inflating early line items gets noticed and can trigger closer review of every application.
• Math that does not tie. To-date columns must equal previous plus this period. One error can bounce the whole package.
• Billing unapproved changes. Keep them separate until signed.
• Forgetting retainage. Track it so you remember to invoice its release.
• Missing the pay app deadline. A few days late can mean waiting another month.
• Too few line items. Large lump sums are hard to assess and easy to dispute.

Progress billing turns one big, risky invoice into a predictable series of smaller ones, as long as your schedule of values, retainage and to-date math are clear. For milestone or stage invoices with professional layout, try our free invoice generator or browse the invoice templates. The generator is free, needs no sign-up and builds a downloadable PDF in your browser.