Progress Billings
Candlefocus EditorProgress billings are useful in estimating project costs, and helping the contractor plan for expenses and resources. They also offer advantages to the customer, in the form of leveraging the timeline and providing them with recourse if the project deviates from the agreed-upon timeline.
Progress billings come in two varieties. The first is a cost plus progress billing. This type of billing is based on actual costs incurred by the contractor, plus a predetermined fee. The second is a fixed price progress billing. With this type, a customer can request an estimate of potential future costs, and the contractor has to stick to it for the duration of the project.
Progress billings are also beneficial in that they break a large project down into smaller, more manageable phases. This helps lower the customer’s risk throughout the project, as well as ensuring that the contractor stays on track and delivers on time and on budget. The customer may be able to review the progress throughout the project, or portions of it if needed, to ensure that the project is progressing well.
In order for progress billing to be successful, however, there must be sufficient communication and collaboration between the customer and the contractor. The customer must clearly explain their expectations and requirements and make sure that the contractor understands and agrees to them. The contractor must also account for the costs and stay on top of the progress billing process to ensure it is properly administered.
Progress billing is a useful tool for large, complex projects, both in terms of the customer receiving payments throughout the project and the contractor having a better understanding of the costs of the project. Effective communication, collaboration and good administration of progress billing is key to ensuring the success of a project.