How to Set Up Progress Invoicing in QuickBooks for Contractors

Progress invoicing is more than simply a feature; it’s a game changer for contractors. Whether you’re building houses, remodeling kitchens, or managing commercial projects, you need a billing system that can scale with your business. QuickBooks excels at progress invoicing. Progress invoicing allows you to bill customers at different stages of a project, rather than only at the beginning of a project, making it easier to manage payments as work progresses.

As an experienced bookkeeper who works with construction companies, I’ve witnessed firsthand the benefits of precise, structured billing. Unlike asking for full payment at the beginning, progress invoicing lets you send multiple invoices as the project advances, providing the benefit of incremental billing and improved cash flow. It’s not just about getting paid; it’s also about meeting customer expectations, tracking cash flow, and staying ahead in a competitive industry.

This article will take you through all you need to know about QuickBooks for contractors, with a focus on construction progress billing, setup recommendations, and how to streamline the process for long-term success. Progress invoicing is especially useful for projects where payment at the beginning is not feasible, helping you avoid asking for full payment upfront.

Progress invoicing in QuickBooks Online is a powerful tool that allows you to create multiple partial invoices from a single estimate, making it ideal for businesses managing large or multi-phase projects. Instead of waiting until a project is complete to invoice your customers, you can send invoices as work is completed, helping to keep your cash flow steady and your project payments organized. By turning on progress invoicing in your Account and Settings under the Sales tab, you unlock the ability to generate multiple partial invoices from one estimate, ensuring that each stage of your project is properly billed. This feature is especially useful for contractors and service providers who need to keep track of payments and progress across several projects, as it keeps all invoices connected to the original estimate and makes it easy to manage ongoing work in QuickBooks Online.

Understanding Progress Invoicing

Progress invoicing, often known as partial billing, is a mechanism for billing consumers in installments throughout the course of a project. Progress invoicing lets you split the total project cost into multiple invoices, allowing for partial payments as work progresses. Instead of invoicing the entire contract amount up front or at the end of the project, contractors can bill based on completed phases or percentages of the estimate.

This function is especially beneficial in the construction and contracting industries, where projects are sometimes lengthy, involve numerous trades or phases, and require a structured payment plan. You can invoice customers for partial payments at different stages of the project, which keeps project payments organized. Using progress invoicing ensures

• Keep the cash flow steady during the project

• Clients should know what they are being charged for. This will lower the chance of payment issues.

• Align billing with the real amount of work that has been done.

• Progress invoicing allows you to split estimates and issue multiple invoices, improving cash flow and project management.

Read more: Progress Invoicing in Construction: What Is It and How It Works

Benefits of Progress Invoicing in QuickBooks 

Implementing progress invoicing in QuickBooks offers numerous advantages:

• Improved Cash Flow Management: Billing throughout the project ensures steady revenue to support operational expenses.

• Detailed Client Communication: Clients receive invoices that correspond directly to completed work, enhancing trust and transparency.

• Project Cost Tracking: Integrates seamlessly with job costing features to help you monitor profitability by phase or line item.

• Streamlined Payment Collections: Provides a clear paper trail for payments already received and amounts still due.

• Keep Track of Your Progress: Progress invoicing helps you keep track of your progress on each project, making it easier to monitor work completed and amounts billed.

• Include Additional Information: You can include additional information on each invoice, enhancing clarity and communication with clients.

How to Activate Progress Invoicing in QuickBooks

To use progress invoicing in QuickBooks, you must enable the feature in your account settings. Please note this feature is only available in specific versions such as QuickBooks Online Plus, Advanced, and QuickBooks Desktop Premier or Enterprise Contractor Editions.

Once the feature is enabled, you can set up and send progress invoices directly from your estimates.

Step-by-Step Instructions:

1. Navigate to the Gear icon (⚙️) in the upper right corner of QuickBooks Online.

2. Select Account and Settings.

3. Click the Sales tab from the left-hand menu.

4. Scroll to Progress Invoicing and select the edit (pencil) icon.

5. Turn on the feature and click Save, then click Done.

Once enabled, you will be able to create invoices from estimates using various billing methods such as a percentage of the estimate or specific line items.

Creating an Estimate as the Foundation for Progress Invoicing

Progress invoicing in QuickBooks starts with a detailed estimate. In step 2, you assign the estimate to a specific customer for better organization. This estimate serves as the baseline for all subsequent invoices, allowing you to bill portions of it as the work progresses. In step 3, you can select items from the initial estimate to include in each progress invoice. After step 5, you can choose an invoice template to ensure consistency and professionalism in your progress invoices.

Steps to Create an Estimate:

1. From the dashboard, select + New and then Estimate.

2. Choose the customer and enter job-specific details.

3. Add each task or deliverable as a separate line item. This will make milestone billing easier.

4. Include estimated costs and any applicable markup percentages.

5. Save the estimate for future use in invoicing

Estimates should be as detailed and itemized as possible, reflecting the agreed-upon scope of work and pricing. This ensures clarity when billing in parts and helps reduce misunderstandings.

Issuing Progress Invoices from an Estimate

After you have completed a portion of the project, you can create an invoice directly from the estimate. Creating progress invoices allows you to bill for work as it is completed. QuickBooks allows you to choose how much of the estimate you want to bill, and each progress invoice created is linked to the original estimate, so the next progress invoice will automatically reflect any changes or adjustments.Methods to Create a Progress Invoice:

• Percentage of the Total: Invoice a flat percentage of the entire estimate (e.g., 30%).

• Custom Amount per Line: Enter a custom dollar amount or percentage for each line item.

• Remaining Amount: Automatically calculates and bills the balance that has not yet been invoiced.

Steps to Generate the Invoice:

1. Open the original estimate.

2. Click Create Invoice.

3. Choose your preferred billing method.

4. Review the draft and make adjustments if needed.

5. Send the invoice to the client directly through QuickBooks.

Each progress invoice generated is linked to the original estimate, so you can easily track how much has been billed and what remains.

Sending Progress Invoices

Once you have an approved estimate in QuickBooks Online, sending progress invoices is straightforward. Start by navigating to the Sales tab, then select All Sales to find your estimate. In the Action column, click Create invoice to begin the process. The invoice form closely resembles the estimate, but with the added flexibility to bill a percentage of each line item or enter a custom amount for each product or service. If you choose to enter custom amounts, the Due column may initially display zeroes—simply adjust these by entering the percentage or dollar amount you wish to bill for each line item. You can leave some line items at zero if you’re not ready to bill for them yet. The Balance due on the invoice will automatically update as you enter amounts for each line, ensuring you always know the remaining balance for the project. When it’s time to send the final progress invoice, check the Remaining total of all lines to ensure you’re billing the full outstanding amount. This process allows you to send progress invoices that accurately reflect the work completed and keep your project billing on track.

Tracking Progress Invoicing and Payments

QuickBooks automatically tracks the amount invoiced and the remaining balance for each estimate. To monitor your progress:

• Go to the customer profileClick on the specific estimate

• Review the linked invoices and their statuses

You may also run an Estimate vs. Actual Report to compare projected costs and revenues with actuals.

Managing Invoices in QuickBooks

Managing your progress invoices in QuickBooks Online is simple and efficient. After you create a progress invoice, review it for accuracy and save it just like any other invoice in the system. To keep track of all your progress invoices and payments, use the Estimates & Progress Invoicing Summary by Customer report. This customer report provides a comprehensive invoicing summary, showing you exactly how much has been invoiced, what payments have been received, and any outstanding balances for each customer and project. By regularly reviewing this summary by customer report, you can ensure that your invoicing remains accurate and that customers are billed the correct amounts throughout the project. If you need additional support with progress invoicing or have questions about invoices in QuickBooks, consider reaching out to an outsourced accounting professional who can help you stay organized and compliant.

Common Challenges and Solutions

Challenge	Solution
Forgetting to enable progress invoicing	Check Account and Settings under the Sales tab to turn on the feature.
Using vague estimates	Break estimates into specific tasks or phases for clarity.
Overbilling or double billing	Use the progress tracking reports to avoid duplicate invoices.
Misalignment between project and invoice data	Regularly update estimates and reconcile with job cost reports.

Integrating Progress Invoicing with Job Costing

To ensure complete financial oversight, contractors should integrate progress invoicing with QuickBooks job costing tools. This includes:

• Allocating expenses to specific jobs or phases

• Tracking actual costs against budget estimates

• Monitoring labor, materials, subcontractors, and overhead

When job costing is properly set up, progress invoices can reflect not only the percentage of work completed but also how costs are tracking against expectations.

Construction Cost Accounting Can Help

We help builders set up and keep up accurate progress billing in QuickBooks here at . The above steps make it possible for any worker to do this on their own, but some find it more efficient to work with professionals who can:

• Make standard invoice forms that show what you do.

• Setting up automatic progress billing based on your value schedule

• Compare the estimates to the actuals for all tasks.

• Balance the books and make sure financial accuracy

Working with a specialized building bookkeeping provider can save contractors a lot of time and money by reducing the amount of work they have to do and making sure their bills are correct.

Best Practices for Progress Invoicing

To get the most out of progress invoicing in QuickBooks Online, start by setting up a project and creating a detailed estimate before you generate your first progress invoice. Projects in QuickBooks are designed to help you organize jobs and track both billing and costs, whether you’re managing a single installation or a complex, multi-phase job. When creating your estimate, break out the scope of work into clear line items—this makes it easier to bill for completed work and communicate with your clients. On each invoice, include an estimate summary that shows the total amount invoiced to date and links back to the original estimate, helping your clients see the remaining balance at a glance. Regularly review and update your progress invoices to ensure that billing and payment tracking remain accurate throughout the project. By following these best practices, you’ll keep your invoicing process smooth, transparent, and professional for every job.

Conclusion

For contractors, setting up and using progress billing in QuickBooks is a key way to keep track of long-term projects, improve cash flow, and keep up with professional pricing standards. Construction business owners can keep track of their projects' finances and avoid payment delays by making detailed estimates, linking invoices, and keeping an eye on work on a regular basis.

If you need help or would rather have someone else do your construction accounting, Construction Cost Accounting can give you reliable help that is specific to the construction business.