Step-by-Step Guide to Setting Up Progress Billing in QuickBooks
- Cost Construction Accounting
- May 19
- 5 min read
Progress billing is a vital tool for construction contractors and service providers who manage long-term projects with multiple phases or milestones. When used effectively, this billing method improves cash flow, provides financial clarity, and strengthens trust between contractors and clients.
This article provides a detailed, formal, and easy-to-follow guide on how to set up and manage progress billing in QuickBooks, specifically tailored for construction companies. Whether you are new to progress billing or need help refining your existing process, this guide will walk you through each step. It also discusses how professional bookkeeping services, such as those offered by Construction Cost Accounting, can support your workflow and ensure accuracy and efficiency.
Understanding Progress Billing
Progress billing is a type of invoicing that allows contractors to bill consumers incrementally for work accomplished on a project rather than sending a single invoice at the conclusion. This is especially beneficial for building projects that last weeks or months and include several phases.
Each invoice represents a percentage of the overall contract value based on the portion of work accomplished to date. This ensures that the contractor receives payments on schedule and decreases the likelihood of cash flow constraints.
Advantages of Using Progress Billing in QuickBooks
One of the most popular financial tools among contractors is QuickBooks, which can be used online or on a computer. Adding progress billing to QuickBooks has a number of benefits, including:
Provides clarity in communication between contractor and client
Helps manage and track project milestones
Supports retention tracking, which is often required in construction contracts
Facilitates faster payment collection
Offers integration with job costing and other accounting functions for comprehensive financial oversight
If you set up QuickBooks correctly, it can be a reliable tool for all parts of progress billing.
Step-by-Step Guide to Setting Up Progress Billing in QuickBooks
Here is a full list of everything you need to do to set up progress billing in both QuickBooks Online and QuickBooks Desktop.
1. Enable Progress Invoicing
In QuickBooks Online:
Navigate to Settings, then select Account and Settings
Click the Sales tab
Scroll to the Progress Invoicing section
Switch the toggle to On
Click Save, then Done
In QuickBooks Desktop:
Go to Edit > Preferences
Select Jobs & Estimates from the left panel
Under the Company Preferences tab, check the boxes for Do you create estimates? and Do you do progress invoicing?
Click OK to save the changes
This step tells QuickBooks to make multiple invoices from a single estimate. This lets you bill clients gradually as work is finished.
2. Create a Detailed Estimate
A well-prepared estimate is the cornerstone of progress billing. It should include:
Customer or project name
Detailed line items for labor, materials, equipment, overhead, and any other cost categories
Unit quantities and rates
Retention or retainage percentage (if applicable)
To create an estimate:
In QuickBooks Online: Go to + New > Estimate
In QuickBooks Desktop: Navigate to Customers > Create Estimates
Make sure you give a very accurate number. This will help you make invoices that accurately show the work that was done and make it easy to settle any disagreements that may come up.
3. Create a Progress Invoice from the Estimate
You can make a progress invoice right from the estimate once work starts and you hit a billable milestone.
In QuickBooks Online:
Open the original estimate
Click on Create Invoice
Select how you would like to bill:
A percentage of each line item
A fixed amount per item
A custom amount for each line item
In QuickBooks Desktop:
Open the estimate
Click Create Invoice
Choose from: Percentage of the entire estimate/ Percentage or quantity per line item/ Custom selection of completed work
This step can be repeated at every milestone or completion percentage until the full amount has been invoiced.
4. Track Retainage
In building projects, clients usually hold back a certain amount of each bill—usually between 5 and 10 percent—until the job is mostly done. We call this "retention" or "retention."
Even though QuickBooks doesn't have a built-in way to track retainages, here are some ways to do it by hand:
Include a separate line item that deducts the retainage amount from each invoice
Track withheld retainage amounts using a separate liability account in your Chart of Accounts
Bill for the retainage as a final invoice once the project is complete
If retainage is a common part of your business, you might want to make a custom QuickBooks invoice template with an area for it.
5. Monitor Job Costing and Financial Reports
When correct job costing is used with progress billing, the two work better together. This lets you compare real costs to estimated costs, keep track of job-by-job profits, and spot possible cost overruns early on.
Some useful reports in QuickBooks include:
Estimates vs Actuals Report
Job Profitability Summary
Profit and Loss by Job
Unbilled Costs by Job
These reports provide insight into project health and ensure that your billing is in line with progress made on site.
Frequently Asked Questions
What is the difference between AIA billing and progress billing?
AIA billing uses standardized forms (G702 and G703) and is typically required for commercial or government-funded projects. Progress billing is more flexible and can be customized to the contractor's preferences using QuickBooks. Some contractors use third-party integrations with QuickBooks to comply with AIA format requirements.
Can I automate recurring progress invoices in QuickBooks?
Progress bills are not automatically generated by QuickBooks. You can speed up the process, though, by copying old invoices or using third-party tools to help with automation.
How should I handle change orders?
It's important to keep clear records of change orders and add them to the original estimate either as new line items or as an updated estimate. Make sure the client agrees to these before adding them to bills.
Best Practices for Contractors Using QuickBooks
Start with a thorough and accurate estimate to prevent disputes later.
Maintain a billing schedule and communicate invoice dates with clients in advance.
Document all change orders and retain proper client approval.
Track and manage retainage separately to ensure timely collection.
Regularly review job costing reports to identify inefficiencies or budget issues.
Implementing these best practices ensures you make the most of QuickBooks’ progress billing capabilities.
When to Consider Professional Bookkeeping Help
QuickBooks has all the tools you need to handle progress billing internally, but it can take time to set it up properly and keep accurate records, especially for contractors who are working on multiple projects at once.
If sending out invoices and keeping the books takes more time than running your business, you might want to get help from an expert. At Construction Cost Accounting, we offer specialized construction bookkeeping services that will make your financial management tools easier to use and more effective.
Our team helps contractors with:
Accurate setup and customization of QuickBooks for contractors
Managing progress billing and retainage
Regular reconciliation of job costs and invoices
Detailed financial reporting to support decision-making
By outsourcing these tasks, you can save time, reduce the risk of costly mistakes, and ensure that your financial data is up-to-date and audit-ready.
Conclusion
Contractors who are in charge of long-term projects need to know how to set up and handle progress billing in QuickBooks. You can make your billing process easier, keep your cash flow steady, and build stronger relationships with your clients if you set up a structured system, make detailed estimates, handle your invoices consistently, and use financial reporting tools.
Implementing good progress billing practices is important for keeping your construction business financially healthy and running smoothly, whether you handle the process yourself or hire a company like Construction Cost Accounting to help you.
If you want to improve the way you bill or need help setting up QuickBooks for progress billing, please get in touch so we can talk about how we can help you reach your goals.
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