How do I handle progress billing for large residential trade jobs?
Progress billing keeps you from bankrolling a customer’s project with your own money. On any residential job lasting more than a couple of weeks, you should be collecting payments at defined stages of work rather than waiting until everything is done.
It starts with the contract. Define milestones tied to physical progress on the job. A common structure is 30% at rough-in, 30% at trim or second fix, and 40% at final completion. Some trades collect a deposit upfront in the 10-20% range and split the rest across milestones. The exact percentages should reflect when you actually incur costs. If you’re buying expensive materials before work begins, a larger upfront deposit makes sense so you’re not floating that money.
Each milestone needs to be specific enough that both you and the homeowner agree on what “complete” looks like. “Rough-in complete and inspected” is much clearer than “halfway done.” Tie billing to observable, verifiable work so there’s no argument about whether you’ve earned the payment.
Invoice the moment you hit each milestone. Don’t let a week go by. The sooner you send the invoice, the sooner you get paid. In QuickBooks, you can create an estimate for the full job and convert portions of it to invoices as milestones are reached.
On the bookkeeping side, track costs against each phase of the job. Code your materials, labor, and subcontractor expenses to the specific project so you can see what you’ve spent versus what you’ve billed at any point during the work. This is where construction job costing becomes essential. Without it, you won’t know if a job is profitable until it’s over and the damage is already done.
Revenue recognition matters more than most trade business owners realize. If you collect 30% at rough-in but you’ve only completed 20% of the actual work, you haven’t fully earned that payment yet. The difference sits as unearned revenue on your balance sheet. Recognizing all of it as income immediately inflates your profit and can create tax problems. The right approach is matching revenue to the work completed so your financials tell the real story.
Progress billing also protects you if things go sideways. If a homeowner stops the project or brings in a different contractor mid-job, you’ve already been paid for the phases you finished. Without milestone billing, you could be sitting on thousands in labor and material costs with nothing to show for it.
The system doesn’t need to be complicated, but it does need to be consistent. Set your milestones before work starts, invoice on time, and make sure every dollar of cost is coded to the right job. If tracking all of this while running jobs feels like too much, that’s a sign you need professional bookkeeping support from someone who understands how trades businesses operate. The financial clarity you get from doing this correctly pays for itself on every large job you take on.
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