How to calculate a progress invoice
A project invoice bills a share of a fixed price rather than hours. On a $24,000 project at 40% complete with 5% retainage held back, this invoice is $9,120 before tax, with $480 retained until the job closes.
retainage = earned × retainage rate
due = (earned − retainage + expenses) × (1 + tax rate) − already invoiced
| Line | Amount |
|---|---|
| 40% of $24,000 contract | $9,600.00 |
| Retainage held at 5% | -$480.00 |
| Subtotal | $9,120.00 |
| Sales tax at 8.25% | $752.40 |
| Due on this invoice | $9,872.40 |
| Retainage held so far | $480.00 |
The second invoice: cumulative or this stage only
There are two ways to fill the calculator in for the next invoice, and they give the same answer.
- Cumulative. Enter the total percentage complete to date and put everything already invoiced on the project, tax included, in "Already invoiced". This is how a progress billing pay application works.
- This stage only. Enter just the share this invoice covers and leave "Already invoiced" at zero.
Continuing the example at 75% complete: cumulative, $18,000 earned less $900 retainage is $17,100, plus 8.25% tax is $18,510.75, less the $9,872.40 already invoiced leaves $8,638.35 due. The stage-only route, 35% of the contract, lands on the same $8,638.35.
Progress billing, milestones and pay applications
Percentage complete suits work that progresses steadily. Milestone billing instead fixes the stages and their amounts in the contract, so each invoice is a set share whenever that stage is signed off; enter that share as the percentage here.
On larger US construction jobs the same figures go on a pay application, commonly the AIA G702 and G703 forms: the schedule of values, work completed to date, retainage and previous certificates for payment. The arithmetic is exactly what this page does.
Percentage complete, agreed before it is billed
Billing a percentage works only when both sides agree what percentage is done. On larger jobs that is what a schedule of values is for: the contract broken into line items with a value each, so progress is a fact rather than an opinion.
On smaller work, agreeing the stages in the quote does the same job. What does not work is deciding the percentage yourself at invoice time.
Retainage is not a discount
Retainage, or retention, is a percentage the client holds back until the job closes and any defects are made good. Five to ten percent is typical on construction work. It is still yours; you just do not have it yet.
Show it as its own line on every invoice. A client who has watched it accumulate pays it at completion. One who never saw it mentioned treats your final invoice as a surprise.
Change orders in writing
A change order agreed verbally on site is not a change order, it is something you will be arguing about in two months. Put the scope change and the price in writing before the work happens. The quote generator produces one in a couple of minutes and it becomes part of the contract.
Related calculators
- Contractor invoice calculatorLabor, materials and job costs into a total
- Hourly invoice calculatorHours and a rate, into a total
- Due date calculatorThe date payment is actually due, for any terms
Questions people ask
How do I invoice a fixed-price project?
Bill the percentage of the contract that is complete, add any agreed change orders and reimbursable expenses, subtract retainage if the contract has it, apply tax, then subtract what you have already invoiced.
What is progress billing?
Invoicing a fixed-price project in stages as the work is done, usually by percentage complete, rather than waiting until the end. Each invoice bills the work completed since the last one, less any retainage.
How is retainage calculated?
Multiply the amount earned on the invoice by the retainage rate in the contract. At 5%, $9,600 of work earned has $480 held back, so $9,120 is billed before tax.
What is the difference between progress and milestone billing?
Progress billing charges the percentage of the work actually complete. Milestone billing charges a fixed amount when an agreed stage is reached. Both can carry retainage, and both work in this calculator.
What is retainage?
A percentage the client holds back on each payment until the job is finished and any defects made good, commonly five or ten percent on construction work. It is released at completion, not written off.
Should retainage show on the invoice?
Yes, as its own line. A client who has seen it held on every invoice pays it at completion without argument. One who never saw it mentioned treats the final bill as a surprise.
How do I decide the percentage complete?
Agree it in advance. On larger jobs a schedule of values breaks the contract into items with a value each so progress is measurable. On small jobs, agree the stages in the quote.
Do change orders get taxed the same way?
Usually at the same rate as the contract work, but the treatment of labor varies by state. Check your own rules rather than assuming.
How do I turn this into an invoice?
The button under the result carries the contract percentage, change orders, expenses and the retainage line into the invoice generator with tax already set.