Progress Payment Terms: Complete Guide to Staged Project Billing

Large-scale projects rarely happen overnight. Whether you're building a commercial facility, delivering a multi-phase software implementation, or managing a year-long consulting engagement, expecting full payment upfront—or waiting until completion to get paid—creates unnecessary risk for both parties.

Progress payment terms solve this challenge by breaking project payments into manageable stages tied to measurable completion milestones. Instead of choosing between "pay everything now" or "pay everything later," progress billing creates a structured payment schedule that protects both service providers and clients while maintaining healthy cash flow throughout lengthy projects.

This guide explains everything you need to know about progress payment terms: how they work, when to use them, how to structure payment schedules, and how to manage the complexities of retention, documentation, and final release.

What Are Progress Payment Terms?

Progress payment terms are a billing structure where clients make multiple payments throughout a project's duration, with each payment corresponding to completed stages of work rather than elapsed time or arbitrary dates.

Unlike time-based billing (where you invoice monthly regardless of progress) or milestone billing (where payments trigger only after completing major deliverables), progress payments typically follow a percentage-of-completion methodology. As the project advances from 0% to 100% complete, the client pays proportionally.

How Progress Payments Work in Practice

A typical progress payment structure looks like this:

$500,000 Construction Project with 10% Retention:

• Contract signing: 10% deposit ($50,000)
• Foundation complete: 20% of contract value ($100,000 minus retention)
• Framing complete: 25% of contract value ($125,000 minus retention)
• Mechanical/electrical rough-in: 20% of contract value ($100,000 minus retention)
• Interior finishing: 15% of contract value ($75,000 minus retention)
• Final completion: 10% balance plus retained amounts ($50,000 + $50,000 retention)

Throughout this project, the client makes six payments totaling $500,000, while the contractor receives consistent cash flow without waiting until project completion. The 10% retention provides the client with leverage to ensure quality completion and defect remediation.

Key Components of Progress Payment Agreements

Well-structured progress payment terms include:

Payment Schedule: Clear definition of what triggers each payment (percentage complete, specific deliverables, inspection approvals)

Payment Amounts: Either fixed amounts per stage or percentages of total contract value

Retention Percentage: Amount withheld from each payment (typically 5-10%) until final completion

Documentation Requirements: What evidence proves completion (inspections, photos, certifications, deliverable acceptance)

Payment Timing: When payment is due after submitting a progress invoice (typically 15-30 days)

Change Order Process: How scope changes affect the payment schedule and contract value

Final Release Conditions: What must occur before releasing retained funds (punch list completion, final inspection, lien waivers)

These components create a predictable payment framework that reduces disputes and maintains project momentum.

Progress Payments vs Milestone Billing vs Time-Based Billing

While these three billing approaches often get conflated, they serve different purposes and suit different project types. Understanding the distinctions helps you choose the right structure for your situation.

Progress Payments: Percentage of Completion

Progress payments directly correlate with work completed, measured as a percentage of the total project. A contractor who has completed 60% of the work can invoice for 60% of the contract value (minus retention).

Best for: Construction, manufacturing, infrastructure projects where completion percentage can be objectively measured

Advantages: Proportional risk sharing, continuous cash flow, objective measurement basis

Challenges: Requires accurate progress assessment, subjective completion metrics in some cases, potential disputes over percentage-complete calculations

Milestone Billing: Event-Based Payments

Milestone billing triggers payments when specific events occur or deliverables are completed, regardless of the work effort required to reach that milestone. Milestones represent discrete accomplishments rather than gradual progress.

Best for: Software development, consulting projects, product launches with distinct phases

Advantages: Clear trigger events, simplified invoicing, no percentage calculations needed

Challenges: Uneven cash flow if milestones are unevenly spaced, risk of scope disagreements, potential for "milestone stuffing" early in projects

Example: A website development project might have milestones for "Design Approval" ($10,000), "Development Complete" ($20,000), "Testing Complete" ($5,000), and "Launch" ($5,000).

Learn more about structuring milestone-based agreements in our milestone billing invoice guide.

Time-Based Billing: Calendar-Driven Payments

Time-based billing creates regular payment intervals (weekly, monthly, quarterly) regardless of completion status. Payments might be fixed amounts or based on hours worked during that period.

Best for: Retainer relationships, ongoing services, projects with unpredictable scope

Advantages: Predictable payment schedule, simple administration, works well for variable-scope projects

Challenges: Disconnected from actual progress, client pays regardless of results, potential for slow progress without consequence

Example: A $120,000 annual consulting contract might invoice $10,000 monthly regardless of project status.

Choosing the Right Approach

Your project type should drive your decision:

Choose Progress Payments when: Projects have measurable physical completion, work proceeds continuously, and both parties want payment tied to objective progress

Choose Milestone Billing when: Projects have distinct phases, deliverables are clearly defined, and payment events are unambiguous

Choose Time-Based Billing when: Scope is uncertain, work is ongoing without clear endpoints, or you're providing continuous services rather than discrete projects

Many sophisticated projects combine approaches—for instance, monthly progress payments with retention released at final milestone completion.

Structuring Progress Payment Schedules

Creating an effective progress payment schedule requires balancing cash flow needs, risk management, and administrative complexity. Too many payment points create invoicing overhead; too few leave dangerous cash flow gaps.

Determining Payment Frequency

Most progress payment schedules fall into one of these patterns:

Percentage-Based Intervals (Every 10%, 20%, or 25% of completion)

• Provides consistent payment rhythm
• Works well for projects with linear progress
• Example: Payments at 25%, 50%, 75%, and 100% complete

Dollar-Based Intervals (Every $50K, $100K, etc. of completed work)

• Simplifies invoicing with fixed payment amounts
• Useful when retention is calculated separately
• Example: Invoice $100,000 each time that amount of work is completed

Time-Based with Progress Verification (Monthly, but payment requires progress documentation)

• Combines calendar predictability with progress accountability
• Common in long-duration projects with steady work rates
• Example: Monthly invoicing with engineer-certified completion percentages

Hybrid Schedules (Major milestones with interim progress payments)

• Balances milestone clarity with cash flow consistency
• Ideal for projects with uneven work distribution
• Example: 20% at design completion, then monthly progress payments, final 10% at completion

Front-Loading vs Back-Loading Payment Schedules

Where you concentrate payment timing significantly impacts project cash flow and risk distribution:

Front-Loaded Schedules (Higher early payments)

• Example: 30% deposit, then payments at 20%, 20%, 20%, 10%
• Contractor benefit: Covers mobilization costs, materials procurement, labor setup
• Client risk: Paying more before seeing substantial results
• Best for: Projects with high upfront costs, established contractor relationships, bonded projects

Even Distribution (Equal payment intervals)

• Example: 20% payments at 0%, 25%, 50%, 75%, 100%
• Balanced approach: Risk shared proportionally throughout project
• Best for: Standard projects, first-time client relationships, predictable cost curves

Back-Loaded Schedules (Higher late payments)

• Example: 10% deposit, then payments at 15%, 20%, 25%, 30%
• Client benefit: Retains leverage throughout project, pays more only as completion nears
• Contractor risk: Cash flow challenges, difficulty covering costs
• Best for: High-risk projects, unproven contractors, projects with significant punch-list work

Most balanced schedules place 10-20% at contract signing (covering mobilization), distribute 60-70% across progress payments, and retain 10-20% for completion and warranty periods.

Calculating Retention Amounts

Retention (or retainage) is the percentage withheld from each progress payment until project completion. Standard retention rates range from 5% to 10%, though some projects use higher rates or declining retention schedules.

Fixed Retention Example (10% retention on $500,000 project):

• Payment 1 (25% complete): Invoice $125,000, receive $112,500 (10% retained)
• Payment 2 (50% complete): Invoice $125,000, receive $112,500 (10% retained)
• Payment 3 (75% complete): Invoice $125,000, receive $112,500 (10% retained)
• Payment 4 (100% complete): Invoice $125,000 + $37,500 retention, receive $162,500
• Total retained until completion: $37,500

Declining Retention Example (Starts at 10%, reduces to 5% after 50% complete):

• Payments 1-2: 10% retention ($12,500 per payment = $25,000 retained)
• Payments 3-4: 5% retention ($6,250 per payment = $12,500 retained)
• Final payment: $125,000 + $37,500 retention = $162,500
• Total retained: $37,500 (same total, but contractor receives more during later stages)

No-Retention Alternatives: Some agreements eliminate retention but require payment and performance bonds, lien waivers with each payment, or third-party escrow accounts instead.

Including Change Orders in Progress Schedules

Projects rarely proceed exactly as planned. Your progress payment agreement should address how changes affect the payment schedule:

Additive Change Orders: Increase contract value and adjust remaining payment amounts proportionally

Deductive Change Orders: Reduce contract value and adjust remaining payment amounts

Schedule-Impact Changes: Modify payment timing or add new payment milestones

Example: A $400,000 project at 50% completion has received $200,000 in payments. A $50,000 change order increases the contract to $450,000. The remaining payment schedule now covers $250,000 (the new 50% remaining) rather than the original $200,000.

Document all change orders in writing with explicit impacts on payment amounts, schedule, and retention calculations.

Industries That Use Progress Payment Terms

Progress payment terms aren't universal—certain industries have adopted them extensively while others rarely use them. Understanding industry norms helps you structure appropriate agreements.

Construction and General Contracting

Progress payments are industry standard in construction, from residential renovations to commercial infrastructure. The American Institute of Architects (AIA) publishes standardized progress billing forms (G702/G703) used throughout the industry.

Typical structure: Monthly progress payments with 10% retention, released 30 days after substantial completion

Measurement methods: Square footage completed, cost-to-cost percentage, weighted milestones

Documentation requirements: Certified payroll, lien waivers, inspection reports, photos

Special considerations: Subcontractor coordination, materials stored on-site, substantial completion definitions

Manufacturing and Fabrication

Custom manufacturers producing large-value items (aircraft components, industrial equipment, specialized machinery) use progress payments to manage the cash requirements of long production cycles.

Typical structure: Payments at 25%, 50%, 75%, and 100% of production completion

Measurement methods: Production stage completion, quality control checkpoints, materials incorporated

Documentation requirements: Quality certifications, production photos, material certifications

Special considerations: Materials procurement costs, tooling expenses, inspection access

Government Contracting

Federal, state, and local government contracts extensively use progress payment terms, governed by regulations like the Federal Acquisition Regulation (FAR) for federal contracts.

Typical structure: Monthly invoicing with costs substantiated through certified cost accounting systems

Measurement methods: Percentage-of-completion, cost-incurred basis, or milestone achievements

Documentation requirements: Certified cost reports, labor timesheets, subcontractor invoices, compliance certifications

Special considerations: Prompt Payment Act requirements, retention limitations, certified payroll, disadvantaged business subcontracting goals

Engineering and Architecture

Design professionals providing services for large projects often use progress payments tied to project phases or percentage of design completion.

Typical structure: Payments at 30%, 60%, 90%, and 100% design completion, or phase-based (schematic design, design development, construction documents)

Measurement methods: Deliverable completion, hours expended as percentage of estimated hours

Documentation requirements: Drawing sets, calculation packages, specification sections

Special considerations: Coordination with construction progress payments, additional services handling, revision cycles

Software Development and IT Projects

While software projects more commonly use milestone billing, large-scale implementations (ERP systems, custom enterprise platforms) sometimes employ progress payment structures.

Typical structure: Hybrid approach with milestone gates and interim progress payments

Measurement methods: Story points completed, function points delivered, user acceptance testing

Documentation requirements: Source code deliveries, test reports, user documentation

Special considerations: Agile methodology compatibility, technical debt management, scope creep prevention

For software projects with clear deliverables rather than continuous development, consider milestone billing approaches instead.

Progress Payment Invoice Requirements

Progress invoices require more detailed documentation than standard invoices. Proper documentation protects both parties by providing objective evidence of work completed and amounts owed.

Essential Progress Invoice Components

Every progress payment invoice should include:

Project Identification

• Contract number and date
• Project name and location
• Current invoice number and period covered

Cumulative Payment Summary

• Original contract amount
• Approved change orders to date
• Adjusted contract amount
• Previous payments received
• Current payment requested
• Retention withheld this period
• Total retention held to date
• Balance remaining on contract

Work Completed This Period

• Description of work performed
• Percentage completion (current period and cumulative)
• Materials incorporated into the work
• Stored materials (if contract allows payment for stored materials)

Supporting Documentation

• Photos of completed work
• Inspection reports or certifications
• Lien waivers from subcontractors (for previous payment)
• Change order acknowledgments
• Schedule of values (itemized breakdown by work category)

Payment Terms

• Due date (typically 15-30 days from invoice date)
• Retention release conditions
• Payment method and address

Schedule of Values: The Foundation of Progress Billing

A schedule of values breaks down the total contract into line items representing different work categories. This document, typically established at contract signing, serves as the basis for calculating progress percentages throughout the project.

Example Schedule of Values ($500,000 Commercial Building):

Each progress invoice indicates the percentage complete for each line item. The invoice amount equals the sum of (line item value × percentage complete) across all items, minus retention and previous payments.

Documenting Percentage of Completion

Accurately determining completion percentage is critical to fair progress payments. Several methods exist:

Physical Measurement Method

• Measures actual work in place (linear feet, square feet, cubic yards)
• Most objective but requires site verification
• Example: 500 of 1,000 linear feet of pipe installed = 50% complete

Cost-to-Cost Method

• Completion percentage = (Costs incurred to date) / (Total estimated costs)
• Useful when physical measurement is difficult
• Requires accurate cost tracking and estimating

Units-of-Delivery Method

• Counts discrete units completed
• Works well for manufacturing and repetitive work
• Example: 75 of 100 equipment units fabricated = 75% complete

Weighted Milestone Method

• Assigns percentage values to key milestones
• Completion percentage jumps at milestone achievement
• Example: Design (30%), fabrication (40%), installation (20%), testing (10%)

Most disputes arise from disagreements about completion percentages. Using objective measurement methods and documenting progress with photos, inspection reports, and certifications reduces conflicts.

Retention Documentation and Conditional Payment

Many jurisdictions require specific documentation when retention is withheld. Your progress invoices should clearly state:

• Amount withheld as retention this period
• Cumulative retention held to date
• Conditions for retention release
• Timeline for retention payment after completion

Some contracts create separate retention line items on each invoice, making the withholding explicit and transparent.

Additionally, if your progress payments are conditional on receiving payment from upstream parties (for instance, a subcontractor waiting for the general contractor to receive payment from the owner), state this clearly on your invoice to manage payment expectations.

Managing Progress Payment Disputes and Adjustments

Even well-structured progress payment agreements encounter disagreements. Common dispute sources include completion percentage calculations, quality concerns, schedule delays, and scope interpretation.

Common Progress Payment Disputes

Completion Percentage Disagreements

The most frequent progress payment dispute centers on how much work is actually complete. The contractor claims 60% completion; the client argues it's only 45%.

Prevention strategies:

• Use objective measurement criteria defined in the contract
• Schedule regular joint progress assessments
• Document progress with dated photos and videos
• Reference the schedule of values with line-item breakdowns
• Engage third-party inspectors or engineers for certification

Resolution approach: If disagreement persists, consider paying the undisputed amount immediately while negotiating the difference, rather than withholding the entire payment.

Quality Deficiency Withholding

Clients sometimes withhold progress payments due to quality concerns, arguing that work completed doesn't meet specifications.

Prevention strategies:

• Establish clear quality standards in the contract
• Implement quality control checkpoints before invoicing
• Address deficiencies promptly rather than moving forward
• Document quality acceptance at each stage

Resolution approach: Separate quality remediation from progress payments when possible. If work is substantially complete but has minor defects, make the progress payment while creating a punch list with cost estimates for corrections that can be deducted from retention.

Scope Interpretation Conflicts

Disagreements about whether specific work is included in the contract base scope or constitutes a change order can stall progress payments.

Prevention strategies:

• Define scope with detailed specifications and drawings
• Establish clear change order procedures
• Document all scope discussions in writing
• Issue change orders promptly when scope changes

Resolution approach: Continue with undisputed work and payments while resolving scope questions. Don't stop the entire project over individual scope disputes.

Schedule Delay Payment Impacts

When projects fall behind schedule, questions arise about whether payments should continue, slow down, or stop entirely.

Prevention strategies:

• Link payments to completion, not calendar dates
• Include schedule performance provisions in the contract
• Establish liquidated damages clauses for delay impacts
• Differentiate between excusable and non-excusable delays

Resolution approach: Progress payments should generally continue based on actual completion, regardless of schedule. Schedule damages and completion percentage are separate issues—address them separately rather than using payment withholding as a delay penalty.

Adjusting Payment Schedules Mid-Project

Sometimes the original payment schedule becomes impractical due to scope changes, schedule revisions, or unforeseen conditions. Modifying the schedule requires agreement from both parties.

When to consider adjustment:

• Significant change orders alter project value by more than 20%
• Schedule changes extend or compress the timeline substantially
• Unforeseen conditions change work sequencing
• Cash flow problems threaten project completion

Adjustment process:

1. Document the reason for adjustment with data and analysis
2. Propose revised payment schedule with clear rationale
3. Show impact on both parties (not one-sided)
4. Memorialize the adjustment in a written contract amendment
5. Update all payment tracking and accounting systems

Example: A six-month project with monthly progress payments encounters unexpected site conditions that extend duration to nine months. Rather than maintaining six payment periods (creating three-week intervals or skipping months), adjust to nine monthly payments with recalculated amounts.

Mechanics Liens and Payment Protection

Contractors and subcontractors using progress payments need to understand mechanics lien rights—legal claims against property when payment isn't received.

Lien filing deadlines: Most jurisdictions require filing within 30-90 days of last providing labor or materials. Progress payment structures can complicate "last date" calculations.

Preliminary notices: Many states require contractors to file preliminary lien notices within specific timeframes to preserve lien rights. Don't skip this step because you expect progress payments to continue smoothly.

Conditional vs unconditional lien waivers: When clients request lien waivers with progress payments, provide conditional waivers (effective only when payment clears) rather than unconditional waivers for payment not yet received.

Example conditional waiver language: "Upon receipt of payment in the amount of $50,000, the undersigned waives lien rights for labor and materials provided through March 31, 2025."

Understanding these protection mechanisms helps both parties manage risk appropriately. Clients can request lien waivers with each progress payment to ensure subcontractors have been paid; contractors can use lien rights to encourage timely payment.

Retention Holdback and Final Payment Release

Retention serves as the client's security deposit—ensuring quality completion and providing funds to address deficiencies. Managing retention properly protects both parties while avoiding unnecessary payment delays at project completion.

Standard Retention Practices

Typical retention rates: 5-10% of each progress payment, though some contracts use higher rates (up to 20%) for high-risk projects

Retention limits: Some jurisdictions cap total retention (for example, maximum 5% on public projects over $50,000 in some states)

Retention reduction: Many contracts reduce retention rates after reaching 50% completion, recognizing reduced client risk as projects near completion

Subcontractor retention: Prime contractors often apply the same retention rate to subcontractor payments, though some jurisdictions prohibit this practice

Conditions for Retention Release

Contracts should clearly specify what triggers retention release. Common requirements include:

Substantial Completion

• Work is complete enough for the owner to occupy and use the facility for its intended purpose
• Only minor punch list items remain
• Typically certified by an architect or engineer
• Triggers the warranty period start date

Final Completion

• All punch list items addressed
• All documentation provided (warranties, as-builts, O&M manuals)
• Final inspections passed
• Certificate of occupancy obtained (if applicable)

Lien Waiver Submission

• Unconditional final lien waivers from prime contractor
• Lien waivers from all subcontractors and suppliers
• Proof that no liens have been filed

Warranty Period Passage

• Some retention (often 50%) released at substantial completion
• Remainder held through 30-90 day warranty period
• Final release after warranty period without claims

Close-Out Documentation

• As-built drawings
• Equipment warranties and manuals
• Training completion for owner's staff
• Spare parts inventory

Partial Retention Release Strategies

Rather than holding all retention until absolute final completion, many sophisticated contracts use staged retention release:

Two-Stage Release

1. Release 50% of retention at substantial completion
2. Release remaining 50% after punch list completion and warranty period

Progressive Release

1. Hold 10% retention through substantial completion
2. Release retention except for 2-3% held through warranty period
3. Release final 2-3% after warranty period expires

Line-Item Release

• Release retention for completed line items from the schedule of values
• Continue holding retention only for incomplete work
• Useful for multi-phase or long-duration projects

These approaches balance the client's need for security with the contractor's need for cash flow, particularly important for small contractors where retention holdback represents significant working capital.

Retention Timing Requirements

Many jurisdictions impose specific timing requirements for retention release after final completion:

Public projects: Often must release retention within 30-45 days of final acceptance

Private projects: Governed by contract terms, typically 30-60 days

Prompt payment statutes: Some states require interest on retention held beyond statutory periods

Best practice: Specify in your contract that retention payment is due within 30 days of final completion acceptance, with interest accruing on any retention held beyond that period.

Interest on Retention

Some contracts require paying interest on retained funds, recognizing that the contractor has essentially provided the client with an interest-free loan for the project duration.

Interest calculation example:

• Project duration: 12 months
• Average retention held: $30,000
• Interest rate: 5% annually
• Interest owed at completion: $1,500

Not all contracts include retention interest provisions, but they're worth negotiating on long-duration or high-value projects.

Final Invoice Best Practices

Your final progress payment invoice should include:

• All remaining work completed
• Final change orders incorporated
• Total retention held throughout the project
• Total contract value (original + approved changes)
• Total payments received to date
• Final balance due (including retention release)
• Documentation checklist confirming all close-out requirements met

Send the final invoice with complete closeout documentation rather than waiting for the client to request it. Proactive submission speeds the final payment process.

For guidance on structuring that final invoice, see our final invoice template guide.

Managing Progress Payments with QuickBillMaker

Tracking multiple progress payments across long-duration projects creates administrative complexity—calculating cumulative amounts, managing retention, documenting completion percentages, and maintaining payment histories.

QuickBillMaker's progress payment features simplify this process with purpose-built tools for staged billing:

Progress Payment Tracking: Create invoice templates with automatic cumulative calculation—the system tracks contract value, previous payments, current requests, and outstanding balances without manual spreadsheet management.

Retention Calculation: Set retention percentages once, and every progress invoice automatically calculates withholding amounts, cumulative retention held, and retention due upon completion.

Cumulative Billing Summaries: Each progress invoice includes a complete payment history showing the entire project financial picture—original contract, change orders, payments to date, retention held, and balance remaining.

Progress-to-Completion Reporting: Dashboard analytics show payment status across all active progress-payment projects, highlighting those approaching completion, overdue invoices, and total retention held across your business.

Schedule of Values Support: Break down contracts into line items with individual completion percentages, and the system calculates total progress automatically based on weighted completion.

Documentation Attachment: Include photos, inspection reports, and lien waivers directly with each progress invoice, creating a complete documentation trail.

Multi-Currency Support: For international projects, handle progress payments in 30+ currencies with automatic conversion and localized formatting.

These features transform progress billing from a complex spreadsheet exercise into a streamlined process, letting you focus on completing great projects rather than wrestling with payment calculations.

Frequently Asked Questions

What's the difference between progress payments and milestone payments?

Progress payments are based on percentage of work completed (measured continuously), while milestone payments trigger when specific events occur or deliverables are completed. Progress payments provide more consistent cash flow throughout a project and are common in construction where completion can be objectively measured. Milestone payments work better for projects with distinct phases and clear deliverable definitions, like software development or consulting engagements.

How much retention should I include in progress payment terms?

Standard retention rates range from 5-10% of each progress payment for most commercial projects. Higher-risk projects might justify 15-20% retention, while well-established relationships or bonded projects might use lower rates or eliminate retention entirely. Consider using declining retention (starting at 10%, reducing to 5% after 50% completion) to balance client protection with contractor cash flow. Some jurisdictions limit retention rates on public projects, so check local regulations.

When is retention released after project completion?

Typical contracts release retention 30-60 days after final completion, defined as substantial completion plus punch list resolution plus submission of close-out documentation. Many sophisticated agreements use two-stage release: 50% at substantial completion and 50% after the warranty period (30-90 days). Always specify retention release timing explicitly in your contract to avoid disputes. Some jurisdictions require prompt retention payment on public projects, sometimes within 30-45 days of final acceptance.

Can I use progress payments for service projects, or are they only for construction?

While progress payments are most common in construction and manufacturing, they can work for any long-duration project with measurable completion stages. Service projects like multi-phase consulting engagements, large-scale implementations, or research projects can use progress payments tied to deliverable completion percentages. However, service projects often work better with milestone billing (payment at completion of distinct deliverables) or time-based billing (monthly invoicing). Choose the structure that best matches how you measure project advancement.

What happens to the payment schedule if there are significant change orders?

Change orders should adjust the total contract value and recalculate remaining payment amounts proportionally. If a $400,000 project at 50% completion (with $200,000 paid) adds a $50,000 change order, the new contract value is $450,000, and the remaining payment schedule covers $250,000 (the new 50% remaining) rather than the original $200,000. Document all change order impacts in writing, including effects on payment amounts, schedule, retention calculations, and completion definitions.

How do I calculate completion percentage for progress billing?

Four common methods exist: (1) Physical measurement—measure actual work in place (square feet, linear feet, units) as a percentage of total; (2) Cost-to-cost—divide costs incurred to date by total estimated costs; (3) Units of delivery—count discrete completed units as a percentage of total units; (4) Weighted milestones—assign percentage values to key milestones and aggregate based on achievements. Choose the method that best suits your project type and establishes objective measurement criteria in your contract to minimize disputes.

What documentation should I include with progress payment invoices?

Essential documentation includes: cumulative payment summary (contract value, previous payments, current request, retention held, balance remaining), work completed this period with percentage calculations, schedule of values with line-item breakdowns, photos of completed work, inspection reports or certifications, lien waivers from subcontractors for the previous payment period, and any approved change orders. More thorough documentation reduces payment disputes and speeds approval. Consider using standardized forms like AIA G702/G703 in construction for consistent formatting.