Progress billings are used in projects that need longer time and high investments, e.g. in construction business. The customer receives invoices, that he has to pay, in predefined stages of the project, e.g. after each phase. The progress billings show how much work has been done. Usually progress billings cover less than 100% of payments, e.g. 20%. The final invoice is received by the customer after the project has been finished. In some construction project, few percents of the sum are kept by the customer to secure guarantee (e.g. total billings are for 95% of investment and final 5% is paid 1-2 years later).
In case of additional costs in the project, the contract has to be updated and since then progress billings can be increased.
- Bodnar, G. H., & Hopwood, W. S. (2001). Accounting Information Systems.
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