For companies looking to manage their long-term projects, progress billing (or progress invoicing) is a viable solution. Rather than waiting months to send a final invoice with all services included, progressing billing allows you to submit invoices as and when you finish work.
In this article, we'll look into what you need to know about progress billing, how it can help you with project management, and how QuickBooks can streamline this process for your business.
Progress billing is an invoicing method where you request payments for work completed during the many stages of a large-scale construction project. Rather than waiting to bill for the entire project at the final stages or up front, businesses can submit their invoices periodically. This helps both parties — the client avoids paying a hefty fee at the beginning or end of the project, and a business can access a steady cash flow that covers any expenses incurred.
Progress billing is not limited to large-scale construction projects. Even tradespeople like roofers, plumbers, electricians, painters, HVAC technicians and others can benefit from it. By using progress billing, they have the ability to invoice clients for completed stages or milestones.
This payment structure offers flexibility and helps in managing cash flow effectively while also creating more trust with clients through transparent billing practices. Progress billing aligns payments with project progress and reduces risks like nonpayment or delays.
The progress invoicing feature in QuickBooks simplifies the billing process for tradespeople, allowing them to concentrate on delivering high-quality work while maintaining financial stability and positive relationships with their clients.
Progress billing helps in project management. Here’s why:
Invoicing for completed tasks throughout a project helps contractors maintain a steady flow of cash. They can use this to cover various expenses like labour, materials, and equipment rentals. It helps with financial stability and allows for the timely completion of the project.
Progress billing helps reduce the financial risks of long-term projects for both clients and contractors. Clients can spread their payments over the project duration, minimising upfront costs. At the same time, contractors receive payments as they achieve milestones. This reduces the risk of non-payment later down the line.
Progress billing can foster more transparency and accountability in managing project finances. By documenting completed work progress and corresponding payments, both parties have clear visibility into project expenses. This practice helps to ensure accurate billing and minimises potential disputes.
When you start using progress billing, you need to think about two essential components to help maintain transparency. These are:
The breakdown of project costs, known as the schedule of values, is a comprehensive document that outlines the expenses for different phases of the project. It provides a clear understanding of costs for both contractors and clients. QuickBooks simplifies the process by incorporating the schedule of values into progress invoices, making it easier to track and be accountable for expenses.
In certain situations, clients may choose to retain a portion of the total project amount until the completion of the project. QuickBooks streamlines this process by offering easy management options for retained amounts. This ensures compliance with contractual agreements and safeguards financial interests effectively.
Progress billing is used in many industries, including construction, aerospace, and defence, where long durations and substantial budgets characterise projects. Contractors, subcontractors, and clients alike will benefit from a more structured payment schedule and transparent invoicing process facilitated by progress billing.
QuickBooks offers an accounting software solution to help you start using progress invoicing. By enabling the QuickBooks progress invoicing feature, users can split their estimates into multiple invoices, each for a different stage of the project. Here's how to get started with progress invoicing in QuickBooks.
Begin by activating the progress invoicing feature in QuickBooks settings. This allows you to create multiple invoices from a single estimate, providing flexibility in billing customers for ongoing projects.
Customise invoice templates to align with your progress billing needs. QuickBooks provides pre-made templates suitable for progress invoicing, ensuring consistency and professionalism in your billing process.
Generate estimates for your projects within QuickBooks, detailing the scope of work and associated costs. These estimates serve as the basis for more progress invoices. This will help you guide the billing process as the project moves forward.
You can use QuickBooks to create progress invoices directly from the estimates. You can choose to invoice for a percentage of the total estimate or specify custom amounts for individual line items, offering flexibility in billing according to project milestones.
Keep track of progress invoices within QuickBooks to monitor your project finances. You can also utilise reports and project management tools to get better insights into your invoice statuses, remaining balances, and the overall progress of the project.
Progress billing helps in managing your long-term projects. It offers a more structured approach to invoicing and payment collection. QuickBooks streamlines the progress invoicing process, empowering businesses to manage project finances efficiently and maintain strong client relationships.
By leveraging QuickBooks' robust features, contractors can navigate the complexities of progress billing with ease, helping with financial stability and project success. With its intuitive interface and comprehensive tools, QuickBooks is a solution for businesses seeking to streamline their progress billing workflows and achieve efficiency in project management. Sign up for QuickBooks Online today with a free 30-day trial.
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