Progress Invoicing for Contractors: Draws, Percentages and Retainage Explained

A three-week kitchen remodel can be invoiced once, at the end. A three-month build cannot. Materials, subcontractors and payroll all come due long before the final walkthrough, and a contractor who waits for completion is effectively lending the client the cost of the job.

Progress invoicing is how that gap gets closed: billing in scheduled draws as the work advances. It sounds like a finance department concept, but the mechanics are simple. What makes it hard is the paperwork — agreeing what each phase is worth, proving how far you have actually got, and keeping the arithmetic consistent from draw to draw.

What progress invoicing actually is

Progress invoicing means dividing a contract into billing events and invoicing against them as work is completed, instead of sending one invoice at the end. Each invoice is a draw. The client pays a portion of the contract, and the remaining balance shrinks.

It only works if a schedule of values and a billing schedule exist before the first draw. Without them, "progress" is an opinion, and opinions are expensive on a job site.

The schedule of values is the backbone

The schedule of values (SOV) breaks the contract sum into line items, usually by phase or trade: demolition, framing, electrical, drywall, finishes, fixtures. Each line gets a value, and the values add up to the contract total.

A few rules make an SOV survive scrutiny:

• Cover the whole contract. Every dollar should sit on a line. A leftover "miscellaneous" bucket invites questions.
• Do not front-load it. Putting 40% of the value into mobilization makes the first draw look like a cash grab. Clients and their lenders notice, and it damages trust for the rest of the job.
• Match the estimate. If the SOV was built from the same line items as the estimate, the client can trace the numbers. If it was invented separately, every draw becomes a negotiation.
• Have it signed. The SOV should be part of the contract or an exhibit to it. A schedule agreed by email is better than nothing; a signed one is better still.

Two ways to measure progress

Milestone billing ties each draw to a defined event: foundation poured, rough-in inspected, cabinets installed. It is the easiest to administer because the trigger is binary. The risk is timing: if a milestone slips, the draw slips with it, even though costs keep arriving.

Percentage billing ties the draw to the estimated percent complete per line: electrical 60%, drywall 35%. It tracks cost more closely, but it depends on honest measurement, and "60% done" is exactly the kind of phrase two people can disagree about.

Most residential work uses milestones; commercial work leans on percentages, often with a milestone-based draw schedule on top. Pick one approach per job and put it in the contract; switching mid-project makes a friendly client suspicious.

The draw invoice: cumulative, not just current

The most common progress billing mistake is invoicing only the current period. A proper draw invoice shows the whole picture:

• Original contract sum.
• Approved change orders to date.
• Total contract sum including changes.
• Amount billed on previous draws.
• Amount billed this period.
• Total billed to date.
• Retainage withheld.
• Current payment due.

That structure lets the client's bookkeeper reconcile the invoice against the contract without calling you. It also protects you: if a previous draw was under-billed, the cumulative column makes the gap visible before it becomes a dispute.

Retainage is money you earn now and collect later

Retainage is a percentage — commonly 5% or 10% on commercial work — withheld from each draw until the project reaches substantial completion. You have earned it, but you do not get it yet.

Three things matter. The rate and release conditions belong in the contract, not in a conversation at the final walkthrough. The calculation should be consistent: if retainage applies to the contract sum, say so; if only to labor, say that. And track it separately so you know how much is held and when it is due. Rules vary by state, province and contract type, so treat the contract and local requirements as the source of truth.

Documentation that gets a draw approved

A draw is a request for money backed by evidence; stronger evidence shortens approval.

• Dated photos of the completed work, taken from the same angle each time so progress is visible.
• Daily logs or a short progress note describing what was done this period.
• Inspection sign-offs where the jurisdiction or contract requires them.
• Approved change orders, attached rather than summarized.
• A one-page draw summary that states the percentage complete per line and the amount requested.

None of this needs to be elaborate. A phone camera and a consistent file naming habit cover most of it.

Five disputes and how to avoid them

1. The front-loaded SOV. The client's lender rejects the first draw because too much value sits in mobilization. Fix: spread value in line with actual costs.
2. Optimistic percentages. Billing 80% on a phase that is visibly half done destroys credibility. Fix: measure with the person who will sign off, and round down rather than up.
3. Missing approval. Work proceeds on a verbal go-ahead and the draw is rejected for lack of documentation. Fix: get written approval before the work, not after the invoice.
4. Retainage arithmetic. The withheld amount changes between draws because someone recalculated from a different base. Fix: state the base once and apply it consistently.
5. Billing before sign-off. The invoice arrives before the inspection the contract requires. Fix: make sign-off a line in your draw checklist.

Draw checklist

1. Contract sum and approved change orders reconcile.
2. Previous billings match the last approved draw.
3. This period's percentage is supported by photos or a sign-off.
4. Retainage is calculated on the agreed base.
5. Lien waiver or certification is included if the contract requires it.
6. Current payment due equals this period's billing minus retainage withheld this period.
7. The invoice references the draw number and the period.

When draw paperwork stacks up

Draw paperwork is repetitive: same client, same contract, same phases, new percentages. Retyping it each month is where errors creep in. One example of a lighter workflow is Invoice Maker, a free-to-download iOS and Android app from Caractiv Tech. It keeps clients and line items for reuse, exports PDFs, tracks invoices as paid, unpaid or partially paid, and supports 34 currencies, with 40+ templates in the Premium tier. You can describe a draw in text or dictate it and have the app draft an editable invoice you review and confirm before sending. Manual invoicing works offline; the AI drafting needs an internet connection. It will not build your schedule of values, but it removes the retyping between draws.

The short version

Agree the schedule of values and the draw schedule before work starts. Bill cumulatively, not just the current period. Measure progress honestly and document it. Track retainage separately. A draw that arrives with clear evidence gets approved; a draw that arrives as a surprise gets audited.

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Disclosure: I work with the team behind Invoice Maker, which is why it appears as one example in this article. This is general information, not tax, legal or accounting advice; retainage rules, lien requirements and contract terms vary by jurisdiction, so check the contract and local requirements that apply to you.

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Appendix: distribution assets (not part of the article body)

Social summaries

X: Progress billing isn't complicated. Front-loaded schedules of values, optimistic percentages and sloppy retainage math are. Bill cumulatively, document each phase, and keep the retainage base consistent. 🏗️

LinkedIn: On a multi-month job, one final invoice means the contractor finances the project. Progress invoicing fixes the cash flow — but only if the schedule of values is agreed up front, each draw is billed cumulatively, and the percentage complete is backed by photos or a sign-off.

Reddit (r/Construction, r/Contractor): Progress draws tend to get rejected for paperwork reasons, not construction reasons: a front-loaded schedule of values, optimistic percentages, retainage recalculated on a different base. Do you bill residential work by milestone or percentage?

Image suggestion

Concept: A clipboard holding a schedule of values with four phases and percentages, beside a phone showing a draw invoice with "previously billed", "this draw" and "retainage" rows; job site softly blurred behind.

Alt text: Schedule of values on a clipboard next to a phone showing a cumulative progress draw invoice.

Notes: 1200×800px blog header; 1080×1080 crop for LinkedIn. Use fictional figures and no real client or project names.