Invoicing & Cash Flow 10 min read BUILT FOR CONTRACTORS

Progress Billing for Construction Contractors: How It Works

Last reviewed for accuracy: March 2026

Imagine you win a $160,000 kitchen extension. You start in January. Week 1: demo and framing — $12,000 in labor. Week 2: electrical rough-in — $8,000 sub invoice. Week 3: plumbing, HVAC rough-in — another $14,000. By the end of week 3, you've spent $34,000 out of your own business account and haven't sent a single invoice. If you're billing at project completion, you're essentially giving the homeowner a 3-month, interest-free loan out of your operating cash. Most remodeling businesses can't sustain that — and it's why contractors with $500k in annual revenue regularly face cash crises. Progress billing fixes this. You invoice in stages — 10% at contract, 25% at framing, 25% at rough-in, 25% at drywall, 15% at final. The homeowner funds the job as it moves forward. Your cash flow looks like a business, not a money pit.

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Real-World Reality Check

How One Contractor Cut Their Average Cash Gap from 47 Days to 12

A Southeast US kitchen and bath remodeler was averaging 47 days between job start and first invoice. After implementing a 5-milestone progress billing schedule (contract, framing, rough-in, drywall, final), their average first-payment gap dropped to 12 days. Their average accounts receivable balance fell from $68,000 to $22,000 — effectively freeing $46,000 in operating capital without taking on debt.

Avg. Days to First Invoice (Before)

47 days

Avg. Days to First Invoice (After)

12 days

AR Balance Reduction

$46,000

Milestones Used

Why Progress Billing Matters

Without progress billing, you’d need to finance the entire job from your own pocket. On a $120,000 kitchen extension that runs 12 weeks, that’s potentially $80,000+ in materials and labor that you’re fronting. Progress billing transfers that cash flow burden back to the project.

It also protects both parties — clients see proof of completion before paying, and contractors don’t perform work without compensation.

The Schedule of Values (SOV)

Before any billing occurs, you and the client agree on a Schedule of Values — a breakdown of how the total contract price is allocated across each major scope of work.

Example SOV for a $180,000 kitchen renovation:

Line Item	Contract Value	% of Total
Demolition	$12,000	6.7%
Rough Framing	$18,000	10.0%
MEP Rough-In	$28,000	15.6%
Insulation & Drywall	$14,000	7.8%
Cabinets & Millwork	$38,000	21.1%
Countertops	$12,000	6.7%
Flooring	$16,000	8.9%
Fixtures & Trim	$20,000	11.1%
Punch List & Closeout	$22,000	12.2%
Total	$180,000	100%

Calculating a Progress Invoice

For each billing period, document percentage complete for each SOV line item. Your draw amount is based on what’s completed.

Draw Amount = (% Complete × Line Item Value) − Previous Billings − Retainage Withheld

Example — Month 2 Application for Payment:

Demolition: 100% × $12,000 = $12,000 (billed last month, not due again)
Rough Framing: 100% × $18,000 = $18,000
MEP Rough-In: 75% × $28,000 = $21,000
All other items: 0%
Gross this period: $39,000
Less 10% retainage: -$3,900
Net Draw: $35,100

Retainage

Retainage is a percentage (typically 5–10%) of each draw that the client withholds until final completion. On a $180,000 project at 10% retainage, the owner holds back $18,000 until the punch list is signed off.

Track your retainage receivable separately from your regular AR — it’s real money owed to you after closeout.

Sources & Further Reading

Written by RemodelFin Editorial Team

RemodelFin's editorial team is comprised of former project managers, estimators, and business owners who have collectively managed over $50M in residential remodeling volume across the US. Our content reflects real job data tracked through the RemodelFin platform.

Pro Trade Content · Reviewed by Industry Practitioners

Contractor Q&A

What is a Schedule of Values in construction billing?

A Schedule of Values (SOV) is a breakdown of how the total contract price is allocated across each major scope of work. It is agreed upon before billing begins and serves as the reference document for every progress invoice. The AIA G703 form is the standard SOV format for commercial work; residential remodelers typically use a simplified version aligned to their project phases.

What is retainage and how much is standard?

Retainage is a percentage of each progress payment that the client withholds until final project completion. Standard retainage is 5–10% of each draw. On a $180,000 project at 10% retainage, the client holds back $18,000 until the punch list is signed. Track retainage receivable separately from your regular AR — it is real money owed to you.

Can I use progress billing on residential remodeling jobs?

Yes — progress billing works on residential remodeling jobs of any size. It is especially effective on projects over $25,000 where the construction timeline exceeds 4 weeks. Even a simple 3-draw structure (deposit, mid-job, final) dramatically improves cash flow compared to billing at completion.

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