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Financial

Progress Billing

In Plain English

The practice of billing the owner each month for only the work completed during that period.

Definition

Progress billing is the practice of invoicing an owner periodically (typically monthly) for the percentage of contract work completed and materials stored during that period, rather than billing for the entire project upon completion. It aligns payments with construction progress, improving cash flow for both contractor and owner. Each billing cycle is supported by a payment application and schedule of values.

Why It Matters in Bidding

Progress billing is the mechanism that keeps a contractor's cash flow positive while a project runs for months, since it converts completed work into periodic invoices instead of one payment at the end. The accuracy of each billing, built from the schedule of values, directly affects how quickly a contractor recovers its costs and pays subcontractors, making billing discipline as important as winning the bid.

Example

On the 14-month office build, the contractor submitted a progress billing each month based on the percentage complete of each schedule-of-values line item, attaching a continuation sheet so the owner's architect could certify the amount due.

Related Terms

Payment ApplicationSchedule of ValuesProgress PaymentRetention

Frequently Asked Questions

Each line item in the schedule of values is assigned a percentage complete for the period, multiplied by its scheduled value, plus the value of materials properly stored on site. The total earned to date, less previous billings and retention, yields the current payment due, documented on a payment application and continuation sheet.
A progress billing is typically packaged as an AIA-style payment application with a continuation sheet detailing each schedule-of-values line, along with lien waivers, stored-material receipts, and sometimes certified payrolls or updated schedules. The architect or owner's representative reviews and certifies the package before payment is released to the contractor.
Common issues include overstating percent complete (front-loading), billing for materials not yet on site or properly documented, missing or unsigned lien waivers, math that does not reconcile with prior applications, and incorrect retention calculations. Any of these can stall certification and delay payment, squeezing the contractor's cash flow.

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