Progress billing is the difference between a contractor who is paid as the work happens and one who is lending the client money for months at a time. The idea is simple enough to explain in a sentence: instead of one invoice at the end, you bill for the portion of the contract finished so far. Doing it so that the claim gets approved without a round of argument is the part that takes setting up.
This guide covers the mechanics in the order you actually need them, and flags where the Canadian version differs from the American one — because holdback and lien legislation change the arithmetic, not just the paperwork.
Start with a schedule of values, not a lump sum
A schedule of values breaks the contract price into line items that together add up to the total. Excavation, foundation, framing, roofing, mechanical rough-in, drywall, finishes. Each line carries its own dollar value, and every progress claim is made against those lines.
This is the single decision that determines whether billing is smooth or contentious. A contract billed as one number can only be claimed as a percentage of the whole, which is a judgement call and therefore arguable. A contract split into thirty lines is claimed line by line, and 'the roof is done' is a fact rather than an opinion.
- Keep line items small enough to be verifiable on a walk-through and large enough that the schedule stays readable.
- Agree the schedule before the first claim, in writing, as part of the contract documents.
- Carry the same line items through to your cost codes, so billed-to-date and cost-to-date sit side by side on the same job.
Calculating percentage complete
There are three defensible methods, and the right one depends on the line. Units completed works for anything countable: 1,800 of 2,400 square feet of flooring is 75 percent, and nobody can dispute it. Milestones work for lines that finish in stages — rough-in, inspection, close. Cost-to-cost, where percentage complete equals cost incurred divided by total expected cost, works for lines that are hard to observe, but it is the weakest of the three because it rewards overspending.
Whichever method a line uses, write it into the schedule of values next to the line. A claim that states its method is much harder to push back on than one that simply asserts a number.
Show what was billed before
Every progress claim should show four columns per line: the scheduled value, the amount billed in previous claims, the amount being billed now, and the total billed to date with the balance remaining. This is not formatting preference. It is what lets a client or a lender's quantity surveyor check the claim in two minutes instead of asking for a breakdown and delaying payment by a week.
It also protects you. When the running total is visible on every claim, a client who approved claims one through four cannot credibly dispute the cumulative figure on claim five.
Holdback belongs on its own line
Statutory holdback — retainage, in the United States — is a percentage of each claim that the payer is required to retain and release only after the statutory period following substantial performance. In Canada the rate and the release mechanics are set by provincial construction or builders' lien legislation, and they differ between provinces.
The mistake that causes disputes is burying holdback in the arithmetic so the claim shows only a net figure. Show the gross claim, the holdback deducted as its own line, and the net payable. The client sees what they owe and what they are retaining, and your own books show holdback receivable as an asset rather than revenue you quietly never billed.
- Holdback is deducted from each progress claim, not from the final one.
- Release is tied to a statutory date, which means it is a calendar task, not something to remember at the end of a job.
- Track holdback receivable per project — across four or five concurrent jobs it is often the largest single amount owed to a builder.
Tax goes on last, and it is provincial
Apply tax to the claim according to where the work is performed. In Canada that means GST, HST, or GST plus PST depending on the province, and the treatment of construction labour and materials under PST varies by province and by situation. In the United States it means state and sometimes municipal sales tax, with construction frequently treated differently from retail.
The order matters: calculate the gross claim, deduct holdback, then apply tax according to your jurisdiction's rules on whether tax is charged on the gross or the net. Getting this backwards on a large claim is a correction nobody enjoys making, and it is the kind of error that makes a client scrutinise every subsequent claim. Confirm the treatment with your accountant rather than copying another contractor's template.
What a complete pay application contains
A progress claim that gets approved on first submission is rarely the shortest one. It is the one that arrives with everything the approver needs to sign it without asking a question.
- The claim summary with scheduled value, previously billed, billed now, and total to date per line.
- Approved change orders listed separately, each with its own approval reference, so the revised contract value reconciles.
- Holdback shown as its own deduction, with the statutory rate stated.
- Supporting documentation the contract or lender requires — commonly photographs, site logs, and statutory declarations or lien waivers.
- The period the claim covers and the date work was valued, so the approver knows what they are certifying.
Where progress billing usually goes wrong
Almost every failure traces back to one of four causes, and none of them are about the invoice itself.
- Billing late. A claim raised three weeks after month end is three weeks of your money funding someone else's project, every cycle, for the life of the job.
- Unpriced changes. Work performed on a verbal agreement cannot be claimed, because there is no approved line to claim it against. Price and sign the change before the crew starts.
- Percentage complete that nobody agreed. If the method is not written down, the number is an opinion and will be treated as one.
- Holdback tracked in someone's head. Release dates arrive months after the work, long after the job has stopped being anyone's daily concern.
Doing this without a spreadsheet
All of the above can be run in Excel, and plenty of builders do. It works until you are running several jobs at once, at which point the weak point is not the arithmetic but the reconciliation: keeping the schedule of values, the approved change orders, the previously billed totals and the holdback ledger consistent across every open project at the same time.
That is the specific job construction billing software does. In BuildersBridge, the schedule of values comes from the estimate that won the work, approved change orders update the contract value automatically when the client signs them in their portal, previously billed totals carry forward on their own, and holdback is tracked per project with its release date visible rather than remembered.