Progress Billing For Contractors: How Milestone Payments Improve Cash Flow

Why Your Billing Structure Has A Bigger Impact Than You Think

If you've ever wrapped up a big job and spent weeks watching your bank account awaiting payment, you already know the core problem. Construction is expensive to run — labor, materials, equipment, and subcontractors all need to be paid regardless of when your invoice clears. That tension between money going out and money coming in is one of the most persistent challenges in the trades.

Progress billing for contractors is one of the most practical tools for keeping that cash flow equation balanced from start to finish. It's a straightforward approach, but it requires some upfront planning to get right — and the right digital system to make it work smoothly on a busy project.

What Progress Billing Actually Is

Rather than sending one invoice when the job is finished, progress billing ties payments to specific project milestones agreed upon in the contract. You get paid as work is completed — after foundation, framing, rough-in trades, and so on — rather than waiting for handover. Both parties know upfront what triggers each invoice, which cuts down considerably on the back-and-forth that tends to delay payment.

The Late Payment Problem Is Very Real

Construction has one of the slowest payment cycles of any industry in the country. Rabbet's 2024 Construction Payments Report found that slow payments cost U.S. construction businesses an estimated $280 billion in a single year, with 82% of contractors now waiting more than 30 days for payment — up from 49% just two years earlier. A significant number wait 60 to 90 days on average.

That gap puts real strain on a business. While the invoice sits unpaid, you're still covering wages, buying materials, and managing equipment costs. For smaller contractors and subcontractors in particular, floating those expenses for months drains cash reserves quickly and can limit your ability to take on new work or keep crews fully employed between projects.

How Milestone Payments Help

Progress billing addresses the waiting problem by spreading income across the life of a project. You recover costs as each phase wraps up rather than in one delayed payment at the end. It also gives you early visibility into potential payment problems — if a client stalls on the second invoice, you know while you still have leverage, not after the job is nearly done.

Setting Up Your Progress Billing Schedule

Start with the contract. Before any work begins, agree on specific milestones and the payment amount linked to each one. Common trigger points include site preparation, foundation, framing, rough-in trades, and final completion. Clear documentation — daily logs, photos, and sign-offs at each stage — backs up every invoice and makes it significantly harder for disputes to take hold once the project is underway.

The Role Of Digital Payment Tools

A solid billing schedule still needs the right system behind it. Contractor-specific platforms automate much of the administrative side — generating invoices when milestones are hit, offering clients multiple payment options, and depositing funds faster than standard processors. Pairing a milestone schedule with a payment platform designed for construction means less time chasing payments and more time running the business.

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