What is Progress Billing?
Progress billing is the practice of invoicing customers periodically based on the percentage of work completed on a long-term contract, rather than waiting until project completion. It aligns cash flow with cost incurred and supports IFRS 15 over-time revenue recognition for construction and similar contracts.
How It Works
- Define measurable milestones in the contract.
- Measure progress using cost-to-cost, units-of-output or surveys of work performed.
- Issue invoices for the earned portion and recognize revenue accordingly.
- Reconcile billings to revenue using the contract asset/liability framework.
Saudi Context
Saudi construction and infrastructure contractors routinely use progress billings tied to engineer-certified percentages of completion, with VAT applied on each interim invoice.
Example
On a SAR 10 million project that is 30 percent complete, the contractor issues a progress invoice for SAR 3 million.