Progress Billing for General Contracting
Progress Billing is the process of preparing and submitting periodic pay applications to the client based on work completed to date. It translates field progress and job cost information into a structured invoice that complies with contract terms, schedule of values, and documentation requirements. The process must coordinate with project management, track retention, and align subcontractor billing with owner billing. When done well, progress billing supports healthy cash flow, reduces disputes, and keeps revenue and WIP reporting accurate.
Review contract billing terms and schedule requirements
Step 1: Obtain executed contract and any billing exhibits
Pull the final signed contract, including any exhibits or attachments related to billing, payment, or schedule of values. Make sure you are working from the fully executed version, not a proposal draft.
Step 2: Identify billing frequency and cutoff dates
Locate the section describing how often you can bill (monthly, milestone-based) and any specific cutoff dates or submission deadlines. Note these dates on a calendar and share them with the project manager.
Step 3: Review required billing format and forms
Check whether the client requires standard forms (such as AIA pay apps) or a custom format. Note whether they want electronic submissions, portal uploads, or hard copies with original signatures.
Step 4: Confirm retention, tax, and approval rules
Read the sections describing retention percentage, tax handling, and who must approve pay applications on the client side. Write these details in a simple summary for quick reference during billing.
Step 5: Identify schedule of values and change order requirements
See how the contract handles the schedule of values: who must approve it, how changes are handled, and how change orders are to be billed. Note whether change orders must be billed on separate lines or integrated into existing items.
Step 6: Create a billing requirements summary sheet
Summarize billing frequency, forms, retention, backup requirements, and submission method into a one-page document. Keep this sheet in the job billing file and share it with project and finance teams.
Maintain and update approved schedule of values (SOV)
Step 1: Review initial SOV from contract or proposal
Identify whether an initial schedule of values was included in the contract or proposal. Compare it to the final contract value and project scope to see if adjustments are needed.
Step 2: Coordinate SOV structure with project manager
Meet with the project manager to confirm that the SOV breakdown matches how they plan to manage and track the job. Adjust line items to group scope sensibly (for example, sitework, structure, interiors) while staying within client rules.
Step 3: Ensure SOV total matches contract value
Confirm that the sum of all SOV line items equals the current contract value, including any accepted alternates. If there is a mismatch, correct the SOV or flag the issue for resolution before submitting to the client.
Step 4: Add approved change orders to SOV
When change orders are approved, add new SOV line items or adjust existing ones as required by the contract. Clearly label change-related lines so they are easy to track over time.
Step 5: Obtain client approval of initial and revised SOV
Submit the initial SOV and any major revisions to the client or their representative for approval if required. Keep written approval or comments in the billing file.
Step 6: Keep the system SOV in sync with the approved version
Update the schedule of values in your accounting or billing system to match the latest client-approved SOV. Verify that line item numbers, descriptions, and amounts are identical.
Coordinate with project team to determine work in place
Step 1: Schedule a billing review with project manager and superintendent
Before each billing cycle, schedule a short meeting or call with the project manager and superintendent to discuss current progress. Choose a time just after the billing cutoff so information is up to date.
Step 2: Provide latest SOV and prior billing summary
Send the team the current schedule of values and the last approved pay application, showing prior billed amounts and percentages. This helps them think in terms of incremental progress.
Step 3: Discuss progress by major scope or SOV group
Ask the team to describe progress by major scopes (for example, foundations, framing, MEP rough-in) and relate that progress to SOV lines. Clarify which scopes are substantially complete and which are just starting.
Step 4: Capture percentage complete or quantities for each line
For each SOV line, ask the team to estimate percent complete at the billing cutoff date or to provide quantities installed where the contract is unit-priced. Record these values carefully.
Step 5: Challenge and clarify unusual jumps or gaps
If a line shows a sudden large jump in completion or no progress for a long time, ask follow-up questions. Make sure estimates are realistic given schedule, inspections, and what the client can see.
Step 6: Summarize agreed work-in-place figures
Prepare a summary of agreed percentages or quantities for each SOV line and send it back to the project team for quick confirmation. Keep this summary as support in the billing file.
Compile subcontractor and vendor billing to align with owner billing
Step 1: List active subcontracts and key suppliers for the job
Create or update a list of active subcontractors and large material suppliers who typically bill monthly. Note their expected billing dates and contact information.
Step 2: Request or confirm receipt of sub and supplier invoices
At the start of the billing cycle, remind subs and suppliers of your billing cutoff and ask them to submit their invoices promptly. Track who has sent invoices and who is still pending.
Step 3: Review sub and supplier invoices for period coverage
Check each invoice to confirm the dates of work or delivery match your owner billing period. If an invoice covers future work or out-of-period items, flag it for discussion with the project manager.
Step 4: Compare sub progress to owner SOV progress
For major scopes, compare what subs are billing to the percentages you plan to bill the owner on related SOV lines. Look for situations where you would be paying subs significantly more than you are billing the owner.
Step 5: Discuss misalignments with project manager
If there are big gaps between subcontractor billing and planned owner billing, meet with the project manager to decide whether owner billing should be adjusted, sub billing should be held back, or other actions are needed.
Step 6: Summarize sub and supplier billing by SOV group
Create a simple summary showing subcontractor and supplier billing totals by major SOV group. Keep this summary in the billing support file to show how your owner billing relates to underlying costs.
Prepare draft owner pay application and billing backup
Step 1: Open the current billing period template in your system
In your accounting or billing software, open the progress billing screen for the job and select the new billing period. Ensure prior approved billing data is loaded correctly.
Step 2: Enter updated percentage complete or quantities for each SOV line
For each SOV line, enter the agreed percentage complete or quantities based on the latest progress summary. The system should calculate this-period billings and cumulative totals automatically.
Step 3: Review calculated retention and totals
Check that retention is being calculated at the correct percentage for each line and for the overall application. Verify that cumulative billed plus remaining equals the total SOV amount.
Step 4: Attach required cost and progress backup
Compile and attach any required backup such as subcontractor invoices, change order summaries, progress photos, or cost reports if the contract requires cost justification. Label each piece of backup clearly.
Step 5: Validate math and cross-check key values
Confirm that total this-period billing equals the sum of all SOV line this-period amounts and that totals carry correctly to the summary page of the application. Reconcile any rounding differences.
Step 6: Save draft pay application and export for review
Save the draft in the system and export a PDF or printout of the pay application and backup package. Store this draft in a clearly labeled folder for internal review.
Review draft billing with project manager and adjust
Step 1: Schedule a billing review meeting with the project manager
Set up a short meeting or call dedicated to reviewing the draft pay application, ideally within a day of preparing the draft to keep information fresh.
Step 2: Walk through summary page and overall billed percentage
Start by reviewing the overall billed-to-date percentage and current application amount. Ask the project manager if these figures feel consistent with their view of project status.
Step 3: Review key SOV lines and change orders in detail
Focus on larger line items and new change order lines. Confirm that percentages, dollar amounts, and descriptions are correct and that no major scope is under- or over-billed.
Step 4: Discuss any strategic adjustments
Ask if there are reasons to be slightly conservative or assertive on certain lines based on client expectations, inspection timing, or upcoming milestones. Adjust percentages within reasonable bounds to reflect this strategy.
Step 5: Update draft billing based on agreed changes
Make the agreed adjustments to SOV line percentages or quantities in the system and regenerate the draft pay application. Ensure totals still reconcile correctly.
Step 6: Obtain PM sign-off on internal draft
Once the project manager is satisfied, have them sign or electronically acknowledge the draft as approved for client submission. Save this sign-off in the billing file.
Assemble and verify required billing documentation package
Step 1: Review contract for required billing backup list
Use your billing requirements summary to identify exactly which documents must be included each period (for example, conditional lien waivers from subs, updated insurance, certified payroll reports).
Step 2: Gather current lien waivers from subs and suppliers
Request and collect period-appropriate lien waivers from all subcontractors and major suppliers being billed. Check that forms are correctly filled out, signed, and dated.
Step 3: Update and attach change order log
Prepare an up-to-date change order log showing pending, approved, and rejected changes. Highlight which approved changes are included in the current billing.
Step 4: Include required compliance or reporting forms
If the contract requires certified payroll, minority participation reports, or safety summaries, obtain the latest versions from the responsible team members and add them to the billing package.
Step 5: Check all documents for consistency and completeness
Verify that project name, job number, billing period, and amounts are consistent across the pay application and all supporting documents. Replace or correct any pages with errors.
Step 6: Create a single organized billing package
Assemble the pay application and all backup in a logical order, either as a single PDF with bookmarks or a clearly tabbed paper package. Label sections so the client reviewer can find items easily.
Submit progress billing to client per contract requirements
Step 1: Confirm submission method and recipient
Verify the exact email address, portal, or physical address where pay applications must be sent, as well as the name of the client contact responsible for initial review.
Step 2: Double-check deadline and cutoff
Confirm the submission deadline for this billing period, including any requirements for original signatures or courier delivery. Plan submission to arrive before the deadline, not on it.
Step 3: Obtain required internal signatures
If the application requires signatures from company officers or the project manager, collect these on the final version before sending. Ensure all signature blocks are completed correctly.
Step 4: Submit the billing package using the required method
For electronic submissions, upload or email the full package according to client instructions. For hard copies, arrange courier or mail and keep tracking information.
Step 5: Request confirmation of receipt
Ask the client contact to confirm receipt of the pay application, either through portal status or a simple email acknowledgement. Save this confirmation in the billing file.
Step 6: Update billing log and AR records
Record the submission date, billing period, and amount in your billing log and accounts receivable module. Note any client-assigned application number or reference.
Track billing status and respond to client questions
Step 1: Record expected payment date based on terms
Based on contract payment terms and submission date, calculate an expected payment date and note it in your AR or billing log. Use this as a reference for follow-up timing.
Step 2: Check client portal or contact for status updates
Regularly review the client’s billing portal or touch base with the client contact to see whether the application is under review, approved, or has comments pending.
Step 3: Log client questions or comments
When the client requests clarification or raises issues with specific line items, document their questions clearly in your log and save any written comments with the billing file.
Step 4: Coordinate responses with project team
Work with the project manager and superintendent to provide factual, concise responses to client questions. Adjust line item detail or provide additional backup when appropriate, staying within contract terms.
Step 5: Submit revised pages or clarifications as needed
If minor corrections or updated pages are requested, revise the pay application as agreed and resubmit the specific pages or documents, clearly marking the revision date and version.
Step 6: Update status and approval details in billing records
When the client approves the application (partial or full), record the approved amount, any reductions, and approval date in your AR system and billing log. Keep copies of approval notices with the billing package.
Record approved billing, update AR and WIP, and reconcile to job cost
Step 1: Post approved billing amount to AR
In the accounting system, create or update the customer invoice record with the approved billing amount and date. Ensure that any differences between submitted and approved amounts are clearly documented.
Step 2: Update WIP and revenue recognition
Adjust WIP and recognized revenue for the job based on the approved billing and company revenue recognition policy. Confirm that percentage-of-completion calculations now reflect the new billed-to-date.
Step 3: Reconcile billed-to-date with SOV and job cost
Run updated reports showing cumulative billing by SOV line and compare to the SOV and job cost to date. Check for any mismatches that could indicate posting errors or mis-coded costs.
Step 4: Inform project manager of approved amounts and any cuts
Send the project manager a summary of the approved billing, including any client reductions or disputed items. Discuss how these cuts will be handled in future billing or negotiations.
Step 5: Update billing and cash flow forecasts
Adjust project-level and company-level cash flow forecasts to reflect expected receipt of this approved billing. Note any delays or reductions that could affect cash planning.
Step 6: File final approved billing package
Save the final approved pay application, client approval notices, and all related support in the project’s billing folder. Make sure everything is clearly labeled for quick reference in future cycles or audits.
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