Progress billing for contractors: how to bill big jobs in stages
Floating two weeks of labor and materials on a big job is how small contractors run out of cash. Billing in stages fixes that.
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Key takeaways
- Progress billing splits a big job into payments tied to visible milestones, so you’re never floating weeks of labor and materials.
- Tie each payment to something the customer can see: materials delivered, a phase complete, the final walk-through.
- Write the whole payment schedule into the quote before work starts.
- Handle changes with written change orders, and close out with a final walk-through before the last invoice.
On a two-week job, a small contractor can easily spend thousands on materials and labor before the customer pays a dollar. Do that on two or three jobs at once and you’re financing your customers’ projects with your own cash, or your credit card.
Progress billing fixes that by splitting a large job into several payments that follow the work. Customers find it fair, because they pay as they see progress, and you keep cash coming in while the job is underway.
Progress billing vs. a deposit
A deposit is a single payment up front to secure the date and cover early costs. Progress billing continues after that, with payments at set points during the job. Most project-based businesses use both: a deposit to book the work, then one or more progress payments, then a final balance.
Choose milestones the customer can see
The best milestones are moments the customer can verify with their own eyes. That keeps each payment simple to request and hard to dispute.
- Materials delivered to the site
- Demolition or prep complete
- A phase finished, such as rough-in, framing, or the first coat
- Substantial completion, with only small items left
- Final walk-through and punch list complete
Common payment schedules
| Job | Example schedule |
|---|---|
| A few days, modest materials | Deposit to book, balance on completion |
| One to two weeks | Deposit, a progress payment midway, final on completion |
| Several weeks or more | Deposit, then a payment at each major phase, final after walk-through |
Example: a $4,800 exterior repaint
- Deposit to book (30%)
- $1,440
- Progress payment when prep and first coat are done (40%)
- $1,920
- Final balance after walk-through (30%)
- $1,440
- Total
- $4,800
Write the schedule into the quote
The customer should approve the payment schedule along with the price, not discover it on the first invoice. List each payment, what triggers it, and the amount.
Payment schedule wording
Payment schedule: [30%] deposit ([$1,440]) due to confirm your start date. [40%] ([$1,920]) due when prep and the first coat are complete. Final [30%] ([$1,440]) due after the final walk-through. Each payment is due within [7] days of the invoice.
Handle changes in writing
Big jobs change. The customer adds a room, you find rot behind the siding, the tile they chose is backordered. Every change to scope or price should be written up and approved before the work happens, and the payment schedule adjusted to match.
- 01Describe the changeWhat’s being added, removed, or done differently, in plain words.
- 02Price itThe cost of the change and any effect on the timeline.
- 03Get it approvedA written approval, not a nod on the driveway.
- 04Update the scheduleAdd the change to the next progress payment or the final balance.
Retainage on commercial work
Commercial and larger construction jobs sometimes hold back a percentage of each payment, called retainage, until the project is complete. If a client asks for it, agree the percentage and exactly when it will be released, and account for it in your cash planning.
Close out the job cleanly
The last payment is the easiest one to lose. The work is done, the crew is on the next job, and the customer has a short list of small things they want fixed. Close out deliberately:
- Walk the job with the customer and write down any punch-list items.
- Finish the punch list promptly, then send the final invoice.
- Provide lien waivers if your state or the client requires them.
- Say thank you, and ask for a review while the result is fresh.
Deposits and progress payments are part of the bigger picture of getting paid faster. If you’re setting deposits for the first time, start with how much deposit to ask for.
Common questions
Is progress billing only for construction?
No. Any multi-day job with meaningful labor or materials can benefit, including landscaping installs, painting, roofing, remodeling, and large cleanups.
What if the customer won’t pay a progress invoice?
Talk to them before doing more work. Find out whether there’s a concern about the progress itself. It’s reasonable to pause until the milestone payment is made, if your agreement says so.
How many progress payments should a job have?
Enough that you’re never far ahead of the customer financially, but not so many that invoicing becomes a chore. Two to four payments covers most small-business projects.
Should progress payments be equal amounts?
Not necessarily. Weight them to your costs. If materials are most of the cost up front, a larger early payment makes sense.