How to run stage or milestone invoicing on a project

Why staged payment matters on longer jobs

Any project running more than a few weeks puts a strain on your cash flow if you're only invoicing at the end. You're paying labour weekly, paying subcontractors on their terms, and buying materials up front - all before you see a penny from the client. Staged or milestone invoicing (sometimes called interim payment) fixes that by letting you claim the value of work as it's done, month by month or stage by stage, instead of carrying the whole job on your own money.

Be clear with yourself about what this is and isn't. You're not asking the client to fund the build in advance - that's a different conversation about deposits and mobilisation payments. You're asking to be paid promptly for work you've already completed, and that distinction matters if a payment ever ends up in dispute.

Agree the payment schedule before you start

The single biggest cause of payment arguments on site is not agreeing how payment works before the first fix goes in. Sort this at tender or contract stage, not halfway through the job. There are three common ways to structure it:

• By stage or milestone - you agree fixed payment points tied to defined stages (strip-out, first fix, second fix, decoration, completion) with either a fixed sum or percentage of contract value against each.
• Monthly valuation - common on larger commercial and JCT-based contracts, where the works are valued at a set date each month regardless of what stage they've reached.
• Schedule of values (SOV) - an itemised breakdown of the whole contract sum against activities or trades, agreed with the client or their QS before work starts, then used as the reference point for every interim valuation.

Whichever you use, get it written into the contract: the valuation dates, how applications are made, how long the client has to respond, and what happens if a valuation is disputed. A verbal understanding is worth nothing once cash is tight and memories get selective. If you're running several projects at once, a job management system for project-based trades that tracks each job's schedule of values against actual progress on site earns its keep - see features.

Application for payment vs a plain invoice

These are not the same thing, and treating them as interchangeable causes real problems. An application for payment (also called an interim application or valuation) is your claim for the value of work carried out up to a valuation date. It's a statement of what you believe is due - it triggers the payer's obligation to respond, not itself a demand for immediate settlement.

A plain invoice, by contrast, is a direct request for payment of a specific, already-agreed sum - appropriate for a completed small job, an agreed variation, or a materials-only charge. On most construction contracts of any size, particularly those running longer than 45 days, the formal application-and-notice process applies instead, and skipping it can cost you your statutory payment rights. Know which regime your contract sits under before you send anything.

Valuing the work: measured, percentage complete, and materials on site

Every valuation needs a defensible basis. Two approaches are common, and many contractors use both together:

• Measured value - actual quantities installed multiplied by agreed rates. More accurate, more defensible, but slower to prepare.
• Percentage complete - an estimate of how far through each activity or trade you are, applied against its value in the schedule of values. Quicker, but only as good as the honesty behind the estimate.

On top of work actually built in, you can usually claim for unfixed materials on site - items delivered and stored but not yet installed - provided they're properly protected, insured, and (on larger contracts) sometimes formally vested in the client. Keep delivery notes and photographs for every batch you want to claim, because this is the line item most likely to get challenged at valuation meetings.

Retention: what it is and when you get it back

Retention is a percentage of each valuation - commonly around 5%, sometimes 3% or nil depending on the contract or sector - withheld by the payer as security against defects. It is not a punishment; it's standard practice, but it needs managing actively or it quietly disappears from your cash flow forecasts.

Typically half the retention (say 2.5% of the 5%) is released at practical completion, with the remaining half held until the end of the defects liability period - usually six to twelve months later - and released on issue of the making good defects certificate. Some contracts allow a retention bond instead of cash retention, which can help your cash position. Whatever the mechanism, track what's owed per job and chase it - retention is often the money contractors simply forget to ask for.

The Construction Act framework, at a glance

The Housing Grants, Construction and Regeneration Act 1996 (as amended, and generally known as the Construction Act) gives most construction contracts a statutory right to interim payment and sets out a notice regime that both sides must follow. In broad terms:

• Once you submit an application, the payer (or a named certifier) must issue a payment notice within the period set by the contract, stating what they consider is due and how it's calculated.
• If the payer intends to pay less than the amount applied for, they must issue a pay less notice by the deadline stated in the contract - otherwise the sum in your application generally becomes payable in full, regardless of whether it was strictly correct.

This is exactly why getting your applications in on time, in the right form specified by the contract, matters more than most contractors realise. A late or non-compliant application can push your due date back a full valuation cycle. This is a genuinely technical area - read your specific contract (JCT, NEC, a bespoke subcontract) and, if a payment dispute is brewing, get proper advice rather than relying on general guidance like this.

Avoid front-loading

It's tempting to load extra value onto early activities - strip-out, scaffolding, setting up welfare - to get cash moving before you've spent much. A modest amount of natural front-loading is normal and usually accepted. Deliberately over-claiming early stages is a different matter, and it tends to unravel.

Once a QS or client spots a valuation that doesn't match what's visibly on site, every future application gets scrutinised harder and trust - which is what keeps interim payment working smoothly - is damaged. It also leaves you exposed later: if the true value of remaining work is less than the payments still owed, you're in a weak position if things go wrong or the contract ends early. Value fairly and you'll get paid faster overall, not slower.

Keep clean records to back up every valuation

Every application should be backed by evidence, not just a number. Dated site photos, delivery notes, signed timesheets, and written instructions for any variations all make a valuation quicker to agree and harder to argue with. If a dispute ever ends up in adjudication, this paper trail is what decides it - reconstructing it from memory months later is far harder than keeping it current as you go. Keeping photos and documents attached to the right project and stage from day one, rather than scattered across phones and email, saves real time at every valuation meeting.

Final account and releasing retention

At the end of the job, the final account reconciles everything: all variations, provisional sums, dayworks, and adjustments against the original contract sum, ending in one agreed final figure. Prepare it with the same level of supporting detail as your interim applications - it's the last chance to recover value you're entitled to, and errors here are expensive.

Retention release should follow automatically from practical completion and the end of the defects period, but in practice it rarely happens without someone chasing it. Build a simple reminder into your process - whether that's a diary note, a spreadsheet, or a job management system for project-based trades that flags retention due dates against each project (see pricing if you're weighing up whether that's worth setting up) - so the final few percent of a job's value doesn't quietly go astray.

Every contract is different, and payment terms are one of the few areas where getting it wrong is genuinely costly. Read your specific contract carefully, and where a payment dispute looks likely, take proper legal or QS advice rather than relying on general guidance.