Progress Payment

What is a Progress Payment?

A progress payment is a partial payment made to contractors during the course of a construction project, typically based on completed work milestones or percentage of overall project completion.

Progress payments help contractors maintain cash flow while giving clients control over payments tied to actual work progress.

How Progress Payments Work

Milestone-Based

Payments triggered by completing specific project phases:

• Foundation completion
• Framing and rough-in complete
• Drywall and paint finished
• Final completion

Percentage-Based

Payments made when certain percentages of work are finished:

• 25% completion = 25% of contract value
• 50% completion = 50% of contract value
• And so on...

Time-Based

Regular payments on predetermined schedule regardless of completion status (less common).

Typical Progress Payment Schedule

Small Residential Projects

• 10% at contract signing
• 40% at rough completion
• 40% at substantial completion
• 10% final payment after punch list

Large Commercial Projects

• Monthly payments based on work completed
• Retainage held until final completion
• Certified payroll and lien waivers required

Benefits for Contractors

Improved Cash Flow: Regular payments help cover ongoing expenses.

Reduced Risk: Smaller outstanding balances if client defaults.

Work Motivation: Payments tied to progress encourage timely completion.

Material Funding: Enables purchase of materials for next phase.

Benefits for Clients

Payment Control: Payments tied to actual work completed.

Quality Assurance: Opportunity to inspect work before releasing funds.

Budget Management: Predictable payment schedule.

Leverage: Ability to address issues before final payment.

Documentation Requirements

Progress Reports: Detailed documentation of work completed.

Photos: Visual proof of milestone completion.

Material Receipts: Verification of materials incorporated.

Lien Waivers: Legal protection from subcontractor claims.

Change Orders: Any approved modifications to original scope.

Best Practices

Clear Milestones: Define exactly what constitutes completion of each phase.

Regular Inspections: Verify work quality before processing payments.

Prompt Processing: Pay approved progress payments within agreed timeframe.

Keep Records: Maintain detailed documentation of all progress payments.

Retain Final Payment: Hold final 5-10% until punch list completion and warranty period begins.