Progress billing on longer jobs

Week four of a seven-week kitchen remodel. The cabinet supplier wanted half up front and the balance on delivery, the plumber and the electrician both invoiced you Net 15, and the tile is sitting in your garage. You have spent close to twenty thousand dollars of your own money and billed nothing, because the contract says you invoice at completion.

Progress billing splits that contract into several invoices tied to work you have actually finished, each one sent as its milestone is reached.

Your outlay peaks long before their payment

On a single-invoice job the money only ever moves in one direction until the last day. The longer the job, the deeper the hole gets.

A $38,000 remodel with roughly $27,000 in cost runs about like this if you bill once:

Your own money is in that job the whole way — $27,000 at the peak, and nothing back for roughly eleven weeks from the first day. Gross margin on the job is $11,000, before a dollar of your overhead. Two of these running at once and you are borrowing against a credit line to cover payroll on work you have already sold.

Milestones the customer can see for themselves

A draw schedule only holds up if both sides agree the milestone happened. Tie each one to a visible, checkable event — not to a calendar date, and not to a percentage you assert.

Good milestones are things like:

• Permit issued and materials on site. Verifiable by a delivery ticket.
• Demo complete, rough plumbing and electrical inspected. The inspection sign-off is the proof.
• Drywall closed and primed. Anyone can look at a wall.
• Cabinets set, countertop templated.
• Substantial completion, punch list issued in writing.
• Punch list closed.

Bad milestones are "50% complete" and "end of month two." Both invite an argument you cannot win with a photo, and "end of month two" bills you for a schedule slip that was the customer's fault as readily as one that was yours.

Use as few draws as still match visible stages and your cost curve.

Sizing each draw

Front-load enough to cover what you spend early — as far as your state lets you, which is the caveat under this table — then keep every draw slightly ahead of your cost curve. Leave a real amount for the end — a final draw of 5% on a $38,000 job gives the customer no reason to sign off on the punch list.

Those splits are market habits, not law — and on residential work the law can override them at both ends.

States can limit both what you collect before work starts and how draws relate to work or materials delivered. Check the current rule for the project state before you write a residential schedule.

A five-draw schedule, run out to the dollar

Same $38,000 remodel, same $27,000 of cost, billed in five draws:

State-law warning: this is a cash-flow illustration, not a residential contract template. A $3,800 payment at signing cannot be used for a California home-improvement contract: the CSLB caps the down payment at $1,000 or 10% of the contract price, whichever is less, and later payments cannot exceed the value of work performed. In that state, move the excess into a draw tied to permitted work or materials; check the project state's current rule before copying any schedule.

The last two columns are the whole point. Billed stays ahead of spent at every stage, so the job funds itself and your margin is not a loan to the homeowner. If a draw sits below your cost line, the split is wrong — move percentage forward, not backward, as far as your state's payment rules let you.

Look at how thin draw two is: $300 of cushion, once the cabinet deposit and both subs have landed. That is a schedule that only just works. One slow payment or one surprise sub invoice and you are financing the job again.

Price your own cost curve, then fit it to your state's rule — not the other way round.

Keep the terms separate

A deposit is one payment before work starts. Net 30 is a due date. Progress billing is the multi-invoice structure: one contract, several invoices, each earned by a finished stage.

What has to be on each progress invoice

Every draw is a complete invoice — own invoice number, own date, own term, own tax treatment. Beyond the usual, three lines prevent almost every phone call:

• The contract total and which draw this is ("Draw 3 of 5").
• Previously billed and previously paid, so the customer can reconcile without digging through email.
• Balance remaining on the contract after this invoice.

On anything with a schedule of values — larger additions, most commercial work — this is a formal document, and general contractors and lenders often require the AIA G702/G703 pair or their own draw form. Ask what format they want before draw one, not after they reject it.

Sales tax on a progress invoice follows your state's rule for the underlying work, and states differ on whether that means taxing each draw or reconciling at completion. Confirm with your state revenue department or your accountant rather than copying what another contractor does.

The three things that break a draw schedule

Change orders billed at the end. A $2,800 change in week two that shows up on the final invoice turns your closing conversation into a dispute. Bill approved change orders on the next scheduled draw, listed separately, or as their own invoice at the time of approval.

A milestone the customer disputes. This is why milestones must be observable. If the inspection passed, draw two is earned.

No stop-work language. Put the consequence of an unpaid draw in the contract, send any required notice in writing, and get state-specific advice before suspending work. Lien notices and filing deadlines run on their own state-law clocks; do not assume continuing work protects them.

Commercial jobs may also withhold retainage from each approved draw until final completion; read the contract for the percentage and release conditions.

Deciding the schedule before you sign

The draw schedule is a pricing decision, and it belongs in the estimate the customer approves — painters and remodelers put it on an estimate, a service business selling a long install puts it on the quote, and either way the customer signs the milestones and the amounts at the same moment they sign the price. DoneQuote builds the priced document from your own services and lets the customer approve it digitally, so the split you worked out against your cost curve is the split they agreed to, in writing, before you buy the first pallet of material.

On a job long enough that you carry cost for weeks, one invoice at the end is a loan you never agreed to make. Three to five draws, each tied to something visible, each landing a little ahead of what you have spent.