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.

As an experienced bookkeeper who works with construction companies, I've witnessed firsthand the benefits of precise, structured billing. 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. 

Understanding Progress Invoicing

Progress invoicing, often known as partial billing, is a mechanism for billing consumers in installments throughout the course of a project. 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. 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.

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.

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.

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. This estimate serves as the baseline for all subsequent invoices, allowing you to bill portions of it as the work progresses.

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 a progress invoice from the estimate. QuickBooks allows you to choose how much of the estimate you want to bill.

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.

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.

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 Construction Cost Accounting. 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.

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.