Progress Billing: How to Invoice a Project in Stages
On a long project, waiting until the end to invoice means financing months of labor and materials yourself. Progress billing solves that by invoicing in stages as the work advances, so payments track the job instead of trailing it.
This guide covers the two common approaches — milestone billing and percentage-of-completion billing — how to lay out a progress invoice, how retainage works, and how to handle change orders and the final invoice. It's written with construction in mind, where progress billing is standard, but the same structure works for any staged project.
Milestone billing vs percentage of completion
Milestone billing ties each invoice to a defined event: 30% when the foundation is complete, 40% when the frame is up, 30% on completion. It's simple to administer and suits projects with clear stages that both sides can check.
Percentage-of-completion billing invoices for the share of each part of the work done since the last invoice. It's common on larger construction contracts, where each progress invoice is often called a pay application or draw request and is reviewed by the client, an architect, or a lender before payment.
Start with a schedule of values
For percentage billing, break the contract sum into its parts before work starts — site work $6,000, foundation $9,000, framing $15,000, and so on, adding up to the total. This schedule of values is what each progress invoice measures against.
Agree it with the client up front. Settling what the framing is worth is much easier before anyone has framed anything.
What each progress invoice shows
A clear progress invoice shows the original contract sum, approved change orders, the value of work completed to date, amounts previously billed, any retainage withheld, and the amount due for this period. The reader should be able to trace the amount due from the running totals without picking up the phone.
Take a $50,000 contract with 10% retainage. If work completed to date reaches $20,000 and $8,000 of it was billed previously, this period's work is $12,000; retainage holds back $1,200, so this invoice asks for $10,800. Retainage held to date is now $2,000, which is 10% of the $20,000 completed.
How retainage works
Retainage, also called retention, is a percentage of each progress payment — often 5% to 10% — that the client, or the main contractor if you're a subcontractor, holds back until the project is complete and any defects are fixed. It protects the payer, but it also means money you've already earned waits months to be paid.
Track it separately so it isn't forgotten, and invoice its release when the contract says it's due — often at substantial or practical completion, sometimes with part held until a defects period ends. Some jurisdictions cap retainage or set deadlines for releasing it, and several Canadian provinces require a similar statutory holdback, so check the rules that apply to your contract.
Change orders and the final invoice
Add approved change orders — called variations in many countries — to the contract sum as separate lines rather than folding them into existing ones, so the client can see what changed and why the total moved. Bill for change-order work only once it's approved in writing.
The final invoice bills everything still outstanding: the remaining contract value, any final change orders, and the retainage due at completion. If part of the retainage is held through a defects period, invoice that last amount when the period ends. On US construction jobs, clients often ask for lien waivers with each payment, so be ready to supply them where your contract or state law calls for them.