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
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