What is progress billing and how do I track it?
Progress billing means invoicing your client based on work completed rather than waiting until the job is finished. For larger projects that take months to complete, this approach keeps cash flowing throughout the job instead of forcing you to finance everything until the end.
The foundation is your schedule of values. This document breaks your contract into line items, usually by phase or trade. A $400,000 project might break into site work, foundation, framing, electrical, plumbing, HVAC, drywall, finishes, and final punch list. Each line item gets a dollar amount, and all the amounts add up to your total contract price.
Each billing period, typically monthly, you calculate the percentage complete for each line item. If framing was budgeted at $60,000 and you estimate it’s 80% done, you bill $48,000 for framing that period minus whatever you already billed previously. Run this calculation for every line item to get your total invoice.
To track progress billing properly, you need to maintain a few things. Keep your original schedule of values with budgeted amounts. Track your billing history showing cumulative invoiced amounts for each line item. Update completion percentages each period. And if your contract includes retainage, track that balance separately. Retainage is the 5% or 10% the owner holds back from each payment until final completion.
The real value of tracking comes when you compare billing to actual costs. This is where construction job costing becomes essential. If you bill 50% complete on electrical but your costs show you’ve burned through 70% of the electrical budget, you’re underbilling and will face a cash crunch when you finish that phase. If you bill 80% but costs show 50%, you’re overbilling and will have to slow billing later when the owner notices progress doesn’t match invoices.
Run a comparison at least monthly between your billed percentage and your cost percentage for each line item. Significant gaps mean either your billing is off or your estimate was wrong. Either way, you need to know before the project ends.
QuickBooks handles progress billing through estimates and progress invoicing. Create an estimate with all your line items, then generate invoices by entering the percentage complete on each item. The software tracks original amounts, previously billed, and current billing automatically.
Set a consistent billing schedule and stick to it. Many contractors bill on the 25th for work through that date, giving the owner time to process payment by month end. A contractor bookkeeper in American Fork who understands construction can help you build this rhythm and make sure your billing stays aligned with actual job progress. Missing a billing cycle means you’re financing that month’s work out of pocket while waiting another period to invoice.
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More Questions
What accounting software works best for HVAC contractors?
QuickBooks Online or Desktop handles most HVAC contractors' needs when set up correctly for job costing. The bigger question is whether you also need service management software for dispatching and scheduling.
Read answerWho provides payroll services for contractors in Utah?
Several types of providers handle contractor payroll in Utah including national payroll companies, local bookkeeping firms, and construction-specialized services. The right choice depends on whether you need job costing integration and certified payroll capabilities.
Read answerWhat is the best way to manage finances for a construction company?
Job costing is the foundation. Know your costs by project, manage cash flow carefully, stay on top of receivables, and review your numbers weekly. Construction companies fail when they're profitable on paper but broke in real life.
Read answerWhat should I track for accurate job costing?
Track labor hours and burden, materials coded to jobs, subcontractor invoices, equipment usage, and allocated overhead. The key is capturing costs at the job level when they happen, not guessing at month-end.
Read answerCan I find a local bookkeeper in Utah County who understands job costing?
Yes, though bookkeepers with genuine job costing expertise are less common than general bookkeepers. Look for someone with actual construction industry experience who can explain how they track costs by job, not just by expense category.
Read answerWhat financial reports should a general contractor review monthly?
Contractors should review profit and loss statements, balance sheets, job cost reports, work in progress reports, and aging reports for receivables and payables. The job cost report matters most because it shows actual profitability by project rather than just overall company numbers.
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