Progress billing on longer jobs

Progress billing divides a contract into several payment requests as work advances. Agree the milestones or valuation method, draw amounts and due dates before starting. Forecast actual receipts as well as invoices: issuing a draw does not mean you have cash to pay the next supplier.

Compare costs before billing once at completion

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.

Illustrative example: a $38,000 remodel with $27,000 in direct costs, billed once at completion and paid on time:

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 profit on the job is $11,000, before a dollar of your overhead. Two identical jobs running together would require twice that funding if no customer payments arrived earlier.

Milestones the customer can see for themselves

A draw schedule only holds up if both sides agree the milestone happened. For milestone billing, tie each draw to a checkable event. Monthly percentage-complete billing can also work when the contract defines the schedule of values, valuation and approval process.

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.

“50% complete” needs a defined way to measure the work. A calendar billing date tells you when to submit an application, but does not by itself establish how much has been earned.

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

Sizing each draw

Match draws to permitted work and material milestones, then forecast whether actual receipts cover costs. Leave a clearly defined final payment tied to closeout. These hypothetical schedules illustrate different structures; they are not market averages or legal templates.

These splits total the contract price but may still be impermissible for a particular residential project.

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.

Example: five draws on a $38,000 remodel

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.

Draw 1 occurs before the cabinet deposit is paid; that is why its $1,200 cost differs from the first table’s $6,400 week-one cost. The tables show different moments.

Billed amounts exceed costs at these milestones, but billed is not collected. You still need cash between signing and draw 2, and while any invoice awaits payment. Add expected clearing dates to your own forecast and arrange funding for any gap the lawful schedule cannot cover.

Look at how thin draw two is: $300 of cushion, once the cabinet deposit and both subs have landed. Even immediate collection would leave little room at that milestone. 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.

Distinguish deposits, due dates and progress billing

A deposit is one payment before work starts. Net 30 defines a payment period from an agreed trigger. Progress billing is the multi-invoice structure: one contract, several payment requests based on agreed stages or measured progress.

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 invoice details, show:

• 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 a contract may require the AIA G702/G703 format or its 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

Changes left out of earlier billing. A $2,800 change in week two needs clear documentation even if payment comes later. Record the added scope, price and schedule impact and obtain approval before the work. Bill the change separately on the draw or invoice allowed by the contract and local payment rules; approval alone does not establish that work has been performed.

A milestone the customer disputes. This is why milestones must be observable. Define all required conditions; an inspection pass establishes only the inspection condition.

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

Agree the draw schedule with the scope and price before work begins. In DoneQuote, enter the agreed milestones and amounts in the payment terms, check them against the scope and legal limits, and send the quote for digital approval. Prepare the later invoices and track receipts in your accounting tool.

Use draws tied to defined stages, with due dates you can fund until payment actually clears.