Progress tracking and billing process need to be described.
Need to describe progressive invoice schema in first bit.
Explain about retention, VAT, advance tracking included in it.
Advance Invoice → Payment Received
Progress report → Payment Application Issued → Payment Certificate received → Progressive invoice (arrow for advance offset link) → Credit Note
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Definition
Progress Billing is a payment method in contracting and construction where the client pays the contractor in stages, based on the actual progress of work, rather than making a single final payment.
The process typically includes:
Dividing the project into measurable phases or percentages of completion.
Submit Payment Applications based on Progress Reports at regular intervals (e.g., monthly) to document completed work.
Registration of Payment Certificates Received from client to record certified value of work done.
Generating Progressive Invoices, adjusted for any advances received and retentions withheld.
This approach ensures that payments are directly tied to certified project progress, supporting contractor cash flow while protecting the client’s financial interests.
In FirstBit
A progressive invoice is generated through a series of linked documents, reflecting the portion of work completed, after adjusting for advance payments and retention.
- Advance Invoice - Issued to request upfront payment before work begins.
- Payment Received - Records client payment and marks it for offsetting.
- Project Progress Report - captures the percentage of work completed on-site.
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- Progress Tracking: This refers to monitoring how much of the project is completed. It’s usually documented through a Progress Report, prepared periodically.
- This report shows the percentage of work done across various stages or deliverables.
- Progress Billing: Based on the recorded progress, partial billing is done.
- Instead of invoicing the full contract amount at once, the client is billed for the portion completed.
- This ensures transparency and fairness in billing.
Progress Billing is a payment approach commonly applied in project-driven sectors like construction and contracting. It enables gradual invoicing aligned with actual work completed, rather than charging the entire contract value upfront or upon project completion.
- Progress Tracking involves assessing the percentage of completion across specific tasks or phases. This is typically documented in a periodic Progress Report detailing stage-by-stage progress.
- The billing process is then tied to these progress figures. Clients receive invoices for the portion completed to date, promoting transparency and aligning financial transactions with the real-time status of the project
- Payment Application Issued -Drafts the billing claim based on reported progress.
- Payment Certificate Received - Approves and certifies the amount to be invoiced.
- Progressive Invoice - An invoice issued based on the certified amount, with any applicable advance deductions
- Credit Note - Used to adjust or correct previous invoices.
Retention
It is a percentage (e.g., 10%) of each invoice amount that is temporarily withheld to ensure project completion and defect resolution. In FirstBit, the retention is automatically applied on every invoice linked to a contract with retention enabled. The retained portion is posted separately to Retention Receivables. Once the retention period ends (e.g., after project completion or the defects liability period), the contractor can issue an Invoice (Retention Claim) to release and collect the withheld amount.
Details on how VAT is treated on retention are specified in the contract attributes.
At project completion and after the retention period ends (e.g., 12 months), the system automatically retrieves original retention and VAT details. A Tax Invoice is generated to finalize the retention release and ensure VAT compliance.
Advance Tracking
The system allows advances paid by the client to be tracked and offset automatically or manually against future progressive invoices. This ensures that only the remaining balance (net payable) is invoiced. The link between the advance invoice and the progressive invoice is maintained, and users can review how much of the advance has been used or is still available.