Contractor Finance Glossary
What is Progress Billing (AIA Billing)?
Definition reviewed .
Also called: AIA billing, progress payments, schedule of values billing
Progress billing is invoicing a long project in stages as work is completed, rather than in one bill at the end, usually against a schedule of values on commercial jobs (the AIA format).
Waiting until a job finishes to invoice it means financing the entire project out of your own cash. Progress billing reduces that exposure by tying invoices to milestones or percent complete, so cash comes in closer to the money going out on labor and materials.
On commercial work the mechanics run through a schedule of values and the AIA billing format, which is where retainage and approval delays enter. Done well, progress billing keeps the cash cycle tight. Done loosely, underbilling piles up and the job quietly funds the customer.
How it is calculated
For a schedule-of-values line, completed-and-eligible-stored value is based on work performed and permitted materials stored, subject to the contract and approval. Current payment requested = cumulative completed-and-stored value claimed on this application minus retainage on that value minus previous certificates for payment carried from prior applications, whether or not collected, using consistent form conventions. Track unpaid certified amounts separately rather than requesting them again. This billing progress is not automatically the cost-to-cost ratio used for revenue recognition; reconcile the difference in WIP. The owner or architect may certify a different amount from the contractor's request.
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