Progress invoicing explained

Whether you’re a small business just starting out or are already well established, choosing how to request payments is an important decision. Traditionally, you’d have to wait until the end of a project or when work is complete to take payments from your customers, also known as billing in arrears. Progress invoicing offers an attractive alternative to this.

But what is progress invoicing? The basic concept is fairly simple: rather than waiting until a job is complete, you can submit invoices throughout the project. You might do this after certain time points, or perhaps when project milestones have been reached, and the amount will generally be a proportional percentage of the total.

Keep reading to find out more about this invoicing method and learn answers to questions such as “When would you use progress invoicing?”

What is progress invoicing?

The first and most important question is: “What is progress invoicing, exactly?”. Progress invoicing emerged from the problem that waiting for a project to be completed can take a long time, which can have a negative impact on small business cash flow. In addition to this, waiting until the end of a project requires placing a lot of trust in your customer, which can expose your business to risk.

With a work in progress invoice, you can send frequent invoices to your customers rather than waiting until the project is completed. You might do this at pre-defined milestones, or you could choose a time period such as every week or every two weeks.  This improves your cash flow without having to ask your customers for advance payments, thereby protecting both parties’ interests.

How progress invoicing works

Now that you know the progress invoice meaning, you might be wondering how this works exactly. As previously mentioned, you should first decide when you will take payments, whether this is time-based or related to the completion of certain tasks. Once you’re clear on these terms, you can create a contract between you and the customer that clearly details when invoicing will occur.

You’ll then need to figure out how you will send these regular invoices. You might choose to simply use a progress invoice template and manually send this at the predefined points. This can work for smaller businesses, but it’s easy to lose track when you’re dealing with multiple projects at a time.

For this reason, it often makes sense to use a payment processing solution such as GoCardless. In this way, you can automatically submit recurring invoices and collect payments without having to think about it. After a simple, one-time setup, payments will be automatically collected on their due date.

Who uses progress invoices?

After asking “what is progress invoicing?”, you may also ask “who uses progress invoices?”. In general, it tends to be used by high-value, long-term projects, and as such is associated with industries such as:

• Construction

• Aerospace

• Web development and design

• Manufacturing

• Engineering

• Government defence

This is just a short list of examples, and there are many different industry approaches to invoicing depending on the type of work and the scale of the project.

What’s included in a progress invoice?

If you’re trying to switch to this invoicing method, then you can simply download a progress invoice template and send this out to your customers. There are a few things that you should make sure are included in a progress invoice, such as:

The original contract amount

You should clearly state how much you have agreed to charge for the entire project and each instalment, and include any amendments if applicable.

Cumulative value of billings

You should show the amount that has been billed up to the invoice date

Balance paid and outstanding balance

Similar to the above point, in this section you can clearly state the cumulative total that the customer has paid up to the invoice date. The outstanding balance should show how much is left to be paid after the invoice date.

Completion percentage

You can indicate what percentage of the project has been completed, either in terms of time or in relation to the amount of work that has been done.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.