Quick Summary:
Progress billing lets you invoice clients based on work completed rather than waiting for milestones or project closeout. Using the percentage of completion (POC) method, firms calculate earned revenue, subtract prior billings and retainage, and determine the current amount due. This improves cash flow, increases transparency, and aligns billing with real project performance. In this guide, you’ll find formulas, examples, formats, templates, and a calculator to help you implement and manage progress billing effectively across projects.
Progress billing uses the percentage-of-completion method to invoice clients based on work completed to date, rather than billing at fixed checkpoints. Firms using progress billing calculate earned revenue continuously. This improves cash flow, billing transparency, and alignment with project progress.
At its core, progress billing ties billing to actual work progress. For example, if a $100,000 project is 40% complete, the firm has “earned” $40,000. From that amount, you subtract previous billings and any retainage to determine the current invoice amount.
Teams often confuse progress billing with milestone billing, but they operate differently. Progress billing is continuous, percentage-based, and dynamically adjusts to actual work progress. It is best for long, complex, or evolving projects. Milestone billing relies on fixed payments tied to specific deliverables or phases and does not reflect incremental progress between milestones.
Progress billing reflects how much work is done, whereas milestone billing reflects which predefined work stage has been reached.
This table guides you through considerations for choosing between progress billing and milestone billing. Generally speaking, you should choose progress billing when you need to closely track actual work performed to date, and milestone billing when you want to bill at predetermined intervals.
|
Consideration |
Choose Progress Billing (POC) |
Choose Milestone Billing |
|
Project Type |
Long-duration, complex, or multi-phase projects |
Shorter projects or clearly segmented phases |
|
Scope Clarity |
Scope may evolve; changes are expected |
Scope is fixed, defined upfront, and unlikely to change |
|
Cash Flow Timing |
Requires steady, ongoing billing to support payroll and overhead |
Billing occurs at defined checkpoints; gaps between invoices are acceptable |
|
Measurement Method |
Progress is measurable continuously (costs, labor hours, % complete) |
Progress is measured by the completion of defined deliverables or phases |
|
Client Expectations |
Client accepts variable invoices tied to actual work completed |
Client prefers predictable, fixed invoice amounts |
|
Administrative Effort |
Higher effort: requires tracking SOV, % complete, prior billings, and Retainage |
Lower effort: simpler billing tied to milestone completion |
|
Risk Allocation |
Risk is shared; billing adjusts with actual performance and effort |
More risk on the firm if actual effort exceeds milestone value |
|
Contract Fit |
Works well with cost-plus, time-and-materials, or evolving scopes |
Works best with fixed-price or tightly scoped contracts |
|
Industry Fit |
AE firms, construction, consulting, engineering, long-term professional services |
Creative services, small projects, fixed-scope engagements |
|
Bottom Line |
Best for accuracy, flexibility, and alignment with real-time project performance |
Best for simplicity, predictability, and clearly defined deliverables |
A few core components work together in progress billing to calculate what has been earned, what has already been paid, and what remains due. They include the schedule of values (SOV), percentage of completion (POC), previous payments, and retainage.
These components help ensure that your invoices reflect actual project progress and retain transparency and financial control:
A progress billing schedule is a calendar-based forecast of when invoices will be issued and when payments are expected over the life of a project. It works with the Schedule of Values to indicate when payments are made, not what is being billed. This helps your firm plan cash flow and set clear expectations for the client.
The billing schedule maps out the schedule of values onto a timeline and typically includes:
A billing schedule is an important tool for cash flow management and planning. It helps to forecast when revenue will be collected so firms can better plan for payroll, overhead, and expenses. This is especially helpful for long and resource-intensive projects.
A clear billing schedule also improves client transparency and confidence. Clients know when to expect invoices and the targets for each billing cycle. The billing schedule is often part of a contractual agreement between both parties before work begins.
Implementation of progress billing includes alignment of your contract, cost tracking structure, and invoicing process so your billing reflects the real work completed at each billing interval. By setting up the right billing structure at the outset of a project, firms can apply the Percentage of Completion method while maintaining consistent and transparent billing throughout.
Accurate progress billing depends on strong project accounting practices that connect budgets, labor tracking, expenses, and invoicing throughout the project.
“From my discussions with firms, I see the billing issues that often come from a weak, often manual setup,” says Austin Miller, CMO at BQE. “If your contract, schedule of values, and tracking method aren’t aligned from day one, you’ll spend the whole project correcting invoices.”
Here are the steps to implement progress billing:
When implemented well, progress billing turns invoicing into an extension of project management, keeping financial performance aligned with actual work completed.
Common Progress Billing Formats
Popular formats include itemized progress billing, AIA-style billing, unit-price billing, and cost-based (time and materials) billing. While each uses the same principles, the presentation and calculation methods vary based on how work is tracked and billed.
We include templates for each progress billing format at the bottom of the article.
This is a very common format for architecture and engineering (AE) and consulting firms. Invoices are typically built around a schedule of values or phased breakdown or work, with each entry showing:
This format aligns well with percentage of completion invoicing, especially when labor hours or costs are used to track progress. In architecture and engineering firms, invoices are often reviewed by the Architect-of-Record or Principal-in-Charge before submission to confirm percentage complete and validate billing accuracy.
This billing method is common in construction and some AE workflows. It follows standardized forms developed by the American Institute of Architects, including AIA G702 (summary) and AIA G703 (detailed line items). These forms also track cumulative billing, which shows the total amount billed across all prior invoice periods, not just the current application for payment.
These invoices emphasize:
AIA-style invoices are more structured and widely accepted on larger, multi-party projects. On construction projects, progress billing packages are often submitted alongside supporting documentation such as lien waivers, change orders, and subcontractor backup.
For more information on this, including templates to use in your work, see our guide to AIA invoicing and billing.
Commonly used in construction trades and some manufacturing contexts, this format bills based on units completed rather than percentage complete. For example:
Progress is calculated by multiplying completed units by the agreed unit price. This approach works best when quantities are measurable and repeatable.
In a cost-based format, invoices show actual costs incurred (labor, materials, expenses), often with a markup. While still aligned with progress billing, it is less dependent on a formal SOV and more closely tied to real-time cost tracking.
Many firms separate direct costs vs. indirect costs during billing. Direct costs include labor, materials, and reimbursable expenses tied to the project, while indirect costs cover overhead such as administration, software, or office operations.
This format is common in:
Net Amount Due = (Total Contract Value × Percentage of Completion) − Retainage − Previous Payments
This formula calculates how much to invoice in the current billing period by converting project progress into earned revenue and adjusting for what has already been billed and withheld. It ensures each invoice reflects only the new value created since the last billing cycle.
In practice, the formula works as follows:
The result is the current amount due; the portion you can bill in the current period.
This example walks through a $100,000 project that is 40% complete with a 10% Retainage agreement. The goal is to calculate the net amount due for the current billing period based on earned value and prior billings.
|
Step |
Component |
Calculation / Logic |
Subtotal |
|
1 |
Total Earned |
$100,000 Contract × 40% Complete |
$40,000 |
|
2 |
Less Retainage |
$40,000 Total Earned × 10% |
($4,000) |
|
3 |
Total Net Earned |
$40,000 − $4,000 |
$36,000 |
|
4 |
Less Prior Billing |
Sum of all previous net invoices |
($20,000) |
|
5 |
Net Amount Due |
$36,000 − $20,000 |
$16,000 |
How to read this table:
The final number ($16,000) is the amount you would include on the current progress billing invoice.
Use this calculator to quickly estimate your current invoice amount. By entering the contract value, percentage complete, retainage, and prior billings, you get the net amount due. This simple tool can be quite useful in estimating and invoicing.
Progress billing is used in many industries where projects are phased or delivered over time rather than as a single finished product. It is particularly valuable in fields where work is complex, ongoing, and tied to measurable progress. Many firms also use progress billing to support revenue recognition requirements under ASC 606, which emphasizes recognizing revenue as performance obligations are completed.
In these industries, progress billing encourages better cash flow management, improves transparency in invoicing, and aligns invoicing with actual work performed over the life of the project.
Each progress billing template below includes a blank version along with mid-project and completion examples, so you can see how values change over time. You can download them in Excel or Google Sheets to fit your workflow.
Example of an AIA-style Pay Application (similar to AIA G702) using this template
Download this template in Excel or Google Sheets
Our G702-style template includes all standard payment application summary fields, retainage tracking, change order adjustments, and automatic balance calculations. You’ll also get a blank form tab, a step-by-step instructions tab, and completed sample pay applications showing both mid-project and final billing scenarios.
Example of an AIA-style Schedule of Values (similar to AIA G703) using this template
Download this template in Excel or Google Sheets
This G703-style template helps you organize and track your full schedule of values with line-item breakdowns, stored materials, percent-complete calculations, and current billing totals. The file includes blank and completed examples so you can see how values change throughout the course of a project.
Example of a professional services progress billing invoice using this template
Download this template in Excel or Google Sheets
The professional services progress billing template is designed for architects, engineers, consultants, and other service-based firms, billing by percentage complete or project phase. It includes space for milestone tracking, prior billings, retainage, reimbursables, and current amounts due, along with completed sample invoices for reference.
Example of a progress billing schedule using this template
Download this template in Excel or Google Sheets
This progress billing schedule template helps project teams map out planned billing milestones, completion percentages, and expected payment timing across the life of a project. The template includes editable schedules, sample billing timelines, and simple tracking tools to improve cash flow visibility and client communication.
Example of a construction progress billing invoice using this template
Download this template in Excel or Google Sheets
Our construction progress billing template combines detailed work completed tracking with retainage calculations, prior payment records, and contract balance updates. The file includes blank and completed examples modeled after real construction payment applications to help contractors streamline monthly billing.
Example of a time and materials progress billing invoice using this template
Download this template in Excel or Google Sheets
The time and materials progress billing template tracks labor hours, equipment usage, material costs, markup percentages, and running project totals in one place. The template includes automatic calculations, editable billing sections, and sample completed invoices to show how ongoing T&M billing works over multiple pay periods.
Progress billing lets you align invoicing with actual work completed instead of waiting for milestones or project closeout. That shift improves cash flow, strengthens client trust, and gives teams a clearer view of financial performance as the project moves forward.
"Most firm owners I talk to come to progress billing because they're tired of waiting 90 days to get paid,” Miller says. “That's fair, but after running it across a few hundred engagements, I'd argue the bigger payoff is the early-warning signal. If billed work doesn't match what's actually getting done by month two, you know in month two, not at closeout when there's nothing left to negotiate."
Implemented well, progress billing will help you:
The challenges of progress billing include maintaining accuracy, client pushback on variable amounts, the risk of overbilling or underbilling, and the cash flow impact from retainage. Progress billing works best with strong systems in place. Without them, it can introduce complexity, inconsistencies, and disputes over progress. Poor tracking can also create unbilled revenue, where work has been completed but never invoiced, reducing profitability and delaying cash collection. Here’s a closer look at the challenges of progress billing:
Progress billing gets complicated fast when you rely on spreadsheets and manual tracking. As projects grow, so do the risks of errors, missed billings, and inconsistent data. The easiest way to simplify the process is to centralize everything in a system built for project-based accounting.
Many firms use Professional Services Automation (PSA) software to connect project tracking, time entry, invoicing, and financial reporting into a single workflow.
With BQE CORE, you can connect time tracking, project progress, and invoicing in one place. Instead of calculating percentages, tracking Work in progress (WIP), and managing Retainage manually, the system updates these values automatically as work is performed.
This allows you to:
Most importantly, it turns progress billing from a reactive task into a proactive part of project management. When your data flows together, your billing stays aligned with actual work without the manual effort.
Why is a schedule of values (SOV) important for progress billing?
A schedule of values (SOV) breaks the total contract into trackable pieces, enabling progress to be measured and billed accurately. Without it, you lose visibility into what has been earned, billed, and completed at a detailed level.
Are AIA G702 and G703 forms required for all progress billing?
No. AIA G702 and AIA G703 are standard in construction, but many firms use simplified or custom formats. What matters is capturing the same core elements, such as progress, prior billings, and current amount due, not the specific form.
What’s the difference between progress billing and milestone billing?
Progress billing tracks work continuously using percentage complete, while milestone billing ties invoices to specific deliverables or phases. One reflects ongoing progress; the other reflects completed checkpoints.
How does retainage affect progress billing?
Retainage reduces the amount you can collect on each invoice by withholding a percentage until project completion. It protects the client but delays the firm’s cash flow.
When should you use progress billing instead of other methods?
Use progress billing for long, complex, or variable projects. It works best when you can reliably measure progress and need a steady cash flow throughout the project lifecycle.