Finish a four-month, $250,000 job and bill it all at the end, and you are the bank: you floated payroll, materials, and subs for sixteen weeks so the owner could hold the money. Progress billing flips that. You bill every month for the percentage of work actually in place, and the tool that makes it work is a one-page document called the schedule of values.
Most guides define the terms and stop. This one fills in the numbers: a 12-line schedule of values on a $250,000 job, the month-two pay application walked line by line, the backup to staple to it, and the two judgment calls - honest percentages and front-loading - that decide whether your applications sail through or sit on a desk.
The schedule of values: the contract, cut into billable pieces
A schedule of values (SOV) breaks the contract sum into line items you can put a percent-complete against. The rule that makes it work is simple: the lines must add up to the contract amount, to the dollar. Nothing gets billed outside the SOV, and nothing on it changes later except by change order.
Submit it in the first week of the job, before the first pay application, because the owner or architect has to approve it and every application afterward hangs off it. Here is a plausible SOV for a $250,000 commercial build-out:
- Mobilization and general conditions - $12,500
- Supervision and project management - $18,000
- Demolition - $9,500
- Concrete and foundations - $22,000
- Framing and rough carpentry - $31,000
- Roofing - $14,500
- Plumbing - $24,000
- Electrical - $26,500
- HVAC - $28,000
- Drywall and paint - $27,000
- Flooring and finishes - $23,000
- Closeout and punch list - $14,000
Twelve lines totaling exactly $250,000. Granularity is a judgment call: fine enough that each percent-complete is defendable on a job walk, coarse enough that nobody is auditing 80 rows. Ten to twenty lines is typical at this size.
Six numbers every pay application reports
A pay application - the AIA G702/G703 format is what most commercial owners expect - is the SOV plus six columns per line:
- Previously billed. Work completed and billed on earlier applications.
- This period. Work completed during this billing cycle.
- Stored materials. Materials delivered and invoiced but not yet installed - billable with backup.
- Percent complete. Cumulative completed-and-stored value divided by the line's scheduled value.
- Balance to finish. Scheduled value minus everything completed and stored to date.
- Retainage. The 5-10% the owner withholds from every payment until substantial completion.
Fill those six columns honestly every cycle and a pay application stops being a negotiation and becomes arithmetic.
Month two, line by line
Month one billed $33,500: mobilization complete, demolition complete, 40% of concrete, and the first 15% of supervision. Now month two, the application that shows how the machine runs. Five lines move:
- Supervision bills another 15% - $2,700 - tracking overall job completion rather than the calendar.
- Concrete and foundations finishes: 60% this period, $13,200, bringing the line to 100%.
- Framing reaches 70% complete: $21,700 this period.
- Plumbing rough-in starts: 30% complete, $7,200.
- Roofing has not started, but $6,000 of roofing material landed on site - billed in the stored materials column, supplier invoice and photos attached.
Cumulatively the job stands at $84,300 completed and stored - 33.7% of the contract - with a balance to finish of $165,700 and $8,430 of retainage sitting with the owner. Every other line shows zero this period, and that is fine. A clean zero is more credible than a fictional 5%.
The backup that gets it approved
An application moves only as fast as its weakest attachment. The reviewer's job is verification, so hand them the verification:
- Stored materials. Supplier invoice, delivery ticket, and photos of the material on site. Some contracts also require it to be insured, or bonded if stored off site.
- Progress photos. Time-stamped shots keyed to the lines that moved this period.
- Lien waivers. A conditional waiver for this application and unconditional waivers for payments already received - plus the same from your subs if you are the GC.
- Change orders. Signed copies for any line added since the approved SOV.
Send the packet the reviewer would otherwise have to chase, and month three's application inherits the trust you built in month two.
Retainage: plan cash around it or it plans you
Retainage of 5-10% comes off every payment and stays with the owner until substantial completion. On this job at 10%, that is $25,000 by the end - for many GCs and most subs, more than the profit in the contract. Run an 8% margin and you finish the work cash-negative until the retainage check clears, which can be months after your last day on site.
Three habits keep it from running your business: price jobs knowing the last 10% arrives long after the last invoice; never count held retainage as spendable cash; and invoice for release the day you hit substantial completion, because retainage almost never shows up unrequested. Rules vary by state - several cap retainage or force a reduction at 50% complete - so treat this as operational guidance, not legal advice, and confirm the specifics for your contracts with your attorney.
The honest-percentages rule
Bill what is actually complete. The percentages on a pay application are not aspirational - the owner's side, usually an architect or a lender's inspector, walks the job with your numbers in hand. Call framing 85% when it is visibly 60% and you do not just lose that line: the entire application stalls for re-review, and every application you submit afterward gets the skeptical treatment.
One inflated line delays the check for all twelve. Play it straight for a few cycles and the opposite happens: your percentages get spot-checked instead of scrutinized, and approval time drops from weeks to days. Under-billing is the quieter mistake - leave real completed work off the application and you are financing the owner interest-free.
Front-loading is a tool - until it is a red flag
Weighting the SOV toward early activities is legitimate. Mobilization, general conditions, and supervision genuinely cost money before much work is visible, and billing them early is how progress billing covers the cash gap that lump-sum billing leaves wide open. On the example SOV, mobilization plus early supervision put roughly $15,000 of month-one billing against costs that are real but hard to photograph.
Abusive front-loading - demolition priced at three times cost, padded early line items - gets SOVs rejected in week one and pay apps rejected in month one. It also digs a hole for you: a back-loaded job where the remaining work costs more than the remaining billings. Set an honest SOV with a defensible early weight, submit it in week one, bill real percentages every month, and progress billing does exactly what it is for - the job funds itself while you build it.
Frequently asked questions
Milestone billing pays fixed amounts when named events happen, like permit approval or rough-in inspection. Progress billing invoices monthly for the percentage of each schedule-of-values line actually complete, so payments track the work instead of the calendar. On jobs longer than a few weeks, progress billing smooths cash flow better and is the format commercial owners and lenders expect.
Yes, in the stored materials column of the pay application, provided the contract allows it. Attach the supplier invoice, a delivery ticket, and photos of the material on site. Some contracts require stored materials to be insured, and off-site storage usually needs a bonded warehouse and prior approval.
Typically at substantial completion, though some contracts and state laws reduce retainage at 50% complete or cap the percentage withheld. It rarely arrives on its own - submit a specific application for the retainage balance as soon as you qualify, and check your state rules with your attorney because caps and deadlines vary.
The owner or architect on a prime contract, or the general contractor for a sub. They review it for balance, mainly to catch front-loading, before the first pay application. Once approved it becomes the fixed billing framework for the whole job, and it only changes through signed change orders.