What Is Progress Billing? A Simple Explanation For A Simple Yet Efficient Invoicing Methodology

The billing dichotomy between business and customer has always been one filled with a plethora of disagreements and that will certainly be a challenge that presents itself during projects that must be overcome. Disputes over timeframes and billing are quite common, however, just because something is common does not make it any less disruptive. 

If businesses and their customers could better organize their project schedules and come to a mutual understanding over payment then there would be a great deal of benefits for both sides to reap. That is why it is paramount that your business starts to implement progress billing. 

It is the invoicing methodology that will solve all scheduling and billing complications involved with project payments, no longer will you have to spend the unnecessary hours programming the project on the fly.   

What Exactly Is Progress Billing? What Makes Efficient?

Progress billing is when payments are made periodically as opposed to one ample amount at the beginning or end of a project. Once a certain amount of work has been completed or a “milestone” has been reached by the business, then the customer will pay them for that amount of work. 

For example, someone hires a construction company to build them a house and they are going to use progress billing. Both sides agree on the specifics of the milestones and once the construction company has completed 25% of the work on the house the customer will pay them 25% of the money owed. 

Progress billing releases any ambiguity between the parties involved and ensures that work and payment has a set schedule to follow that works for everyone. This invoicing system is typically used for long-term more expensive projects but can be executed in more small to medium sized endeavors, but those usually have more clarity and focus than the ones that take up substantial chunks of time. Both sides will see vastly superior results when there is a strict schedule to follow and no uncertainty, all thanks to progress billing.   

Benefits To Your Companies’ Cash Flow and Morale 

A businesses’ cash flow is of the utmost importance to the success of it. A strong cash flow is what keeps a business not just alive but thriving. Progress billing is the ultimate invoicing tool that will make any cash flow issues a thing of the past or improve upon an already great one. By a business being paid in intervals it ensures that there is always steady money flowing in. 

Let’s stick with a construction company for an example, the construction company employed on a project needs raw materials to continue on working. However, what if they do not have the funds to obtain the materials needed? What if they need to go into debt to purchase the resources? This will not be an issue with progress billing as funds will consistently be coming to their disposal and they can use the money they are paid as they go along on the materials needed for the next phase of the project.

Employee morale is key to the success of your enterprise. With happier and more motivated employees comes better results. By applying progress billing you can shoot two birds with one stone. 

Progress billing is all about scheduling, it eliminates any confusion and sets a clear pathway to what all parties involved must do. If your employees know exactly what their job is asking of them it can alleviate any stress that weighed down on them. Moreover, by being paid as the work is completed it motivates and incentivizes employees to get the job done. This means they get paid faster and more often, as well as your business getting the job done right and on time. What does that mean… More profits. 

How Progress Billing Benefits The Customer

All of us at one point or another have been a customer who felt like the business we gave money to was undeserving of it. One of the many strengths of progress billing is that it allows the customer to hold the people they hire accountable. 

 Without progress billing a customer could pay a colossal sum entirely upfront and then wait months for the business to even begin the work they were paid to do. By the customer only having to pay when milestones have been reached it gives them a greater sense of security. There is no need to fear losing out on a deposit and watching money go to waste.

Progress billing  is typically used for more costly projects and it can sometimes be a struggle for the customer to come up with all the necessary capital needed to pay the vendor. Much like it is beneficial for a company to get paid in intervals because of the continuous needed funds for a project, it is advantageous for a consumer, who perhaps, needs more time to come up with all the capital needed to move forward and pay in intervals as well. This way consumers can proceed on projects that they typically might hold back on due to a lack of funds. They get what they want done and businesses get, well, more business. It is a win-win for everyone.

At MBSATA we can offer you the services necessary to succeed when implementing progress billing. We will work directly with you,  it is entirely your choice whether we work in person or via the internet, to setup a standard template that aligns with your proposal. We can also assist in creating the best layout for all AIA contracts that can be easily customized by our team at any time to best suit your needs throughout the various contracts that are written. Implementing progress billing as your invoicing system is the next step you must take for success, but working with us here at MBSATA is the one to take after that. Progress billing will put you on the path to success but we will ensure that you find your way there.   

Nobody wants to feel like they are being “ripped off” or deal with scheduling disputes, that is why it is vital that your business adopts progress billing. If you are a customer, ask about using it as the invoicing system for any projects you ever want to complete. All projects will be well organized and structured, as well as your businesses cash flow seeing a great deal of improvement.

 Employee morale and motivation will be much higher and the challenge to buy new resources will be a problem seen in the rear view mirror. Customers never have to worry again about losing out on deposits or waiting around for work to even begin after they paid entirely upfront. Nor will they be concerned about having to wait to pay for a project as they can collect capital as the project moves forward. Progress billing will make projects simpler, finances effortless to manage, and make your life much easier.  

image from Sharon McCutcheon