Progress Billing Explained, With a Template

Progress billing means invoicing a construction project in stages as the work gets done, instead of sending one invoice at the end. Each progress invoice starts from the contract sum including approved change orders, states how much of the work is complete to date, subtracts any retainage the contract holds back and everything billed before, and asks for the difference. You measure "complete" in one of two ways: by percent complete against a schedule of values, or by milestones written into the contract. The template further down works for both.

This is based on AIA documentation and, for the German part, the statutes as of November 2026. It isn't legal or tax advice.

How progress billing works

There are two common ways to decide what you can bill each period.

A deposit is something else: money before the work starts, credited against later invoices. Time-and-materials billing is also different, because there's no fixed contract sum to measure progress against.

On many US commercial projects, progress billing runs through AIA pay applications. According to the AIA, its G702 and G703 forms show "the total dollar amount of the work completed and stored to date, the amount of retainage (if any), the total of previous payments, a summary of change orders, and the amount of current payment requested", and G703 breaks the contract sum into portions "in accordance with a schedule of values prepared by the contractor". The arithmetic below is the same whether you use AIA forms or your own invoice.

How to calculate a progress billing invoice

An example with made-up numbers. The contract is 120,000 dollars, one approved change order adds 6,000, and the contract holds back 10 percent retainage on every payment. This is the third invoice.

Two habits keep this clean. Bill cumulatively, so each invoice shows the total completed to date and subtracts what came before; a percentage set too high last month corrects itself this month. And keep retainage on its own line, because it comes due later on its own terms and has to be tracked until it's released. How retainage works under German construction contracts is in Construction Retention: Track It, Get It Back. When the scope changes mid-job: Construction Change Orders: Template, Pricing.

Progress billing template

Everything in square brackets is a placeholder. Copy it once into your invoicing tool as a template.

[Your company name]
[Street address] · [City, State ZIP]
[Phone] · [Email]

Bill to:   [Client name]
           [Street address]
           [City, State ZIP]

PROGRESS INVOICE NO. [3]
Invoice number:     [unique sequential number]
Invoice date:       [MM/DD/YYYY]
Project:            [project name and site address]
Contract:           [contract date and number]
Work through:       [period end date]

Original contract sum                      [120,000.00]
Approved change orders                     [+ 6,000.00]
Contract sum to date                       [126,000.00]
Work completed and stored to date          [75,600.00]
  ([60] % per attached schedule of values)
Less retainage ([10] %)                    [- 7,560.00]
Total earned less retainage                [68,040.00]
Less previous invoices                     [- 40,500.00]
------------------------------------------------------
CURRENT AMOUNT DUE                         [27,540.00]
Balance to finish, incl. retainage         [57,960.00]

Sales tax, if applicable:                  [amount]
Payment due:                               [date / terms]

Attachment: schedule of values with each line's
scheduled value, percent complete and amount to date

Leave the sales tax line out if it doesn't apply in your state or to your type of work. Payment terms come from your contract; depending on the state and the project, prompt payment and retainage laws can apply on top, so check yours.

Where progress billing goes wrong

• Front-loaded schedule of values. Putting too much value on early line items gets cash in sooner, and careful owners and lenders look for it. Keep line values close to what the work actually costs.
• Change orders billed before they're approved. Bill a change only once it's signed. Until then it sits outside the contract sum.
• Percentages without backup. "60 percent" needs something behind it: quantities installed, a site photo, a walkthrough. Without it, the invoice gets questioned and paid late.
• Retainage nobody tracks. Held-back money is easy to forget at the end of a long job. A list per project with the amount held and the release condition fixes that.

Progress billing in Germany: the Abschlagsrechnung

If you build in Germany, the progress invoice is called an Abschlagsrechnung. Under § 632a of the German Civil Code, a contractor may ask for a progress payment "in Höhe des Wertes der von ihm erbrachten und nach dem Vertrag geschuldeten Leistungen", backed by a statement that allows a quick and reliable assessment of the work. Under § 16 VOB/B, standard construction terms that apply when the contract incorporates them, progress payments come due within 21 days after the client receives that statement. For consumer building contracts, § 650m caps all progress payments together at 90 percent of the agreed total price. As long as the work isn't complete, VAT on a progress payment arises in the period the money comes in, and the final invoice has to deduct the progress payments and their VAT. Invoices between German businesses are moving to e-invoicing; the dates are in German E-Invoicing Mandate: Dates, Exemptions. The German version of this article has a full Abschlagsrechnung template with the mandatory invoice fields. What a contractor checks on a subcontractor's invoice is in Subcontractor Invoice in Germany: Template. How the final invoice deducts the progress payments is in Contractor Invoice: Template, Final Invoice.

What an AI employee does with progress invoices

The two roles below run in my own business. Here's how you use them for progress billing.

Anton creates invoices in the accounting tool, "never as a loose PDF", and "He never finalizes on his own": even if pushed, he first names the consequences, such as the final invoice number, and wants a clear yes. For billing on a schedule, you describe the workflow to him once. His rule "Without a price source, he sets no price" turns into: no site data, no percentage. Anton works with Lexware Office, a German accounting tool, and according to his page can use an adapter for other systems with a suitable interface; the routes are in Lexoffice Integrations: API, Banks and Shops, and how an AI checks a draft is in Writing Quotes and Invoices with AI.

Peter screens receipts in my bookkeeping interface. In one run, "His own control calculation came out exact", and a line that was slightly off stayed open on purpose. Peter runs exactly that check on every progress invoice before approval: is the total billed higher than the work completed, and which invoices are still unpaid? To set it up, you write down the workflow, Peter learns it in read-only mode, you test it on real cases, then you approve it. For an unpaid invoice, Peter prepares the reminder; how that works with AI is in Automate Payment Reminders and Dunning.

Frequently asked questions

What is progress billing in construction?

Invoicing a project in stages as work is completed, based on percent complete against a schedule of values or on milestones. Each invoice subtracts retainage and earlier invoices, so the client pays only for new progress.

What's the difference between progress billing and AIA billing?

AIA billing is one way to do progress billing, using the AIA G702 and G703 forms, common on US commercial projects. The math is the same. If your clients don't ask for AIA forms, your own progress invoice with a schedule of values attached is enough. Which software produces AIA pay apps is in Construction Invoicing Software Compared.

Is a progress payment the same as a deposit?

No. A deposit is paid before the work starts and is credited later. A progress payment pays for work already done.

How do I handle change orders in progress billing?

Add an approved change order to the contract sum and, if needed, as its own line in the schedule of values. From then on it's billed by percent complete like any other line.

Can AI create progress invoices?

It can prepare the draft from your schedule and site data and check the numbers. Percent complete is your call, and nothing is finalized without your yes. Which roles carry over to a trades business is in AI Agents for Tradespeople: Roles, Not Tools.

What to do next

Set up the template once in your invoicing tool and keep one list per project: invoice number, work completed to date, retainage held, payment received. Then the final invoice is arithmetic, not a search. If you want to know whether an AI employee can prepare your progress invoices, book a strategy session: in 20 minutes we look at the one workflow that depends on you the most. More industries are on AI by industry. The overview for construction businesses is in AI Construction Estimating: What It Can Do.