Yes, QuickBooks Online (QBO) supports progress invoicing, allowing you to bill customers in stages for large projects or long-term contracts. You can create progress invoices by either manually adjusting the amount on a standard invoice or by using QBO’s built-in progress invoicing feature, which lets you track and bill based on a percentage of completion. This article explains both methods, how to set them up, common pitfalls, and answers to frequent questions.
What Progress Invoicing Means in QuickBooks Online
Progress invoicing is a billing method where you invoice a customer for a portion of a project’s total value at different milestones or intervals, rather than sending one large invoice at the end. In QBO, this is useful for contractors, consultants, and any business that works on multi-phase projects. The core idea is that each invoice reflects the work completed up to that point, so cash flow stays steady and the customer sees a clear breakdown of charges.
QBO offers two practical ways to handle progress billing:
- Manual progress invoicing – You create a standard invoice and simply enter a partial amount, either by editing line items or by applying a discount. This is simple but requires you to track the overall contract value yourself.
- Progress invoicing feature – QBO’s built-in tool (available in Plus and Advanced plans) lets you set up a project, define a total amount, and then generate invoices based on a percentage of completion. QBO calculates the amount to bill and tracks how much has been invoiced versus the total.
How to Create a Progress Invoice in QBO (Step-by-Step)
Here’s how to use the built-in progress invoicing feature in QuickBooks Online Plus or Advanced:
- Go to Sales > Invoices and click New Invoice.
- Choose the customer and add line items that represent the full project scope (e.g., labor, materials).
- Before saving, click the Progress invoicing toggle (or select “Create progress invoice” depending on your QBO version).
- Enter the Total project amount – this is the full contract value, which may differ from the sum of line items if you’re using a fixed fee.
- For each invoice, enter the Percentage complete (e.g., 25%). QBO will calculate the invoice amount as that percentage of the total, minus any prior invoices.
- Review the invoice, add any notes or payment terms, then save and send.
If your QBO plan doesn’t have the toggle, you can still create a progress invoice manually: create a normal invoice, then adjust the line item amounts to reflect only the work done so far. For example, if a $10,000 project is 40% complete, you’d invoice $4,000 by either reducing the quantity or applying a discount line.
Key Settings and Requirements
Before you start, check that your QBO subscription includes the progress invoicing feature. It’s available in QuickBooks Online Plus and Advanced; it’s not in Simple Start or Essentials. Also, progress invoicing works best when you have a clear project total and a way to estimate completion percentage. You’ll need to set up the customer and items (products or services) as usual.
One important setting is the invoice number sequence – you may want to use a separate numbering prefix (e.g., “PROJ-001”) to distinguish progress invoices from regular ones. You can customize this in Settings > Sales > Invoices.
Common Mistakes and How to Avoid Them
Even experienced users run into issues with progress invoices. Here are the most frequent problems and solutions:
- Double-counting amounts – If you manually adjust line items but forget to subtract previous invoices, you’ll overbill. Always review the “Total billed so far” field in the progress invoice window.
- Using the wrong plan – If you’re on Simple Start or Essentials, you won’t see the progress invoicing toggle. Upgrade or use the manual method.
- Not linking to a project – QBO’s progress invoicing works best when you use the Projects feature (available in Plus and Advanced). Link each invoice to the project to track profitability and remaining balance.
- Forgetting to update the percentage – If you bill 25% in month one and 50% in month two, you must change the percentage to 75% (cumulative), not 50%. QBO calculates based on the total percentage you enter, not the increment.
Progress Invoicing vs. Milestone Billing vs. Regular Invoices
It’s easy to confuse progress invoicing with other billing methods. Here’s a comparison:
- Progress invoicing – Bills based on percentage of work completed, often monthly or at intervals. Good for ongoing projects with no fixed milestones.
- Milestone billing – Bills a fixed amount when a specific milestone is reached (e.g., “50% deposit” or “upon delivery”). QBO doesn’t have a dedicated milestone feature, but you can achieve it by creating invoices with predetermined amounts and using the progress invoice toggle only if you want to track percentages.
- Regular invoices – Bill the full amount at once, typically after the job is done. This is the default and simplest method.
Choose progress invoicing when the project spans months and you need regular cash flow. Use milestone billing when you have defined deliverables. Use regular invoices for one-time sales or short jobs.
Progress Invoice Template
Below is a generic progress invoice template you can adapt for your own use. Fill in the blanks with your business details and project information.
| Invoice # | ______ | Date | ______ |
|---|---|---|---|
| Bill To | ______ | ||
| Project Name | ______ | ||
| Total Contract Amount | $______ | % Complete | ______% |
| Amount Previously Billed | $______ | Amount Due This Invoice | $______ |
| Description of Work Completed: | |||
| ______ | |||
Sample (fictional): Invoice #PI-102, Date 2025-03-15, Bill To: Acme Construction, Project: Office Renovation, Total Contract $50,000, % Complete 40%, Previously Billed $10,000, Amount Due $10,000. Description: Framing and electrical rough-in completed.
Frequently Asked Questions
Can I create a progress invoice in QBO without upgrading my plan?
Yes, you can manually create a progress invoice on any QBO plan by adjusting the line items or adding a discount to reflect the partial amount. However, the automated progress invoicing feature (which calculates based on percentage) is only available in Plus and Advanced plans.
How does QBO calculate the amount on a progress invoice?
QBO multiplies the total project amount by the percentage you enter, then subtracts any amounts already invoiced for that project. For example, if the total is $10,000, you enter 30% complete, and you’ve already billed $1,000, the new invoice will be for $2,000 (30% of $10,000 = $3,000 minus $1,000).
Can I edit or delete a progress invoice after it’s been sent?
Yes, you can edit or void a progress invoice as long as it hasn’t been paid or deposited. Go to the invoice, click Edit or Void, and make changes. Be aware that voiding an invoice will not automatically adjust the “total billed” for the project, so you may need to manually correct the next invoice.
Does progress invoicing work with retainage or deposits?
QBO doesn’t have a dedicated retainage feature, but you can handle it by adjusting the percentage or adding a line item for “retainage withheld.” For deposits, you can create a separate invoice for the deposit and then track the remaining balance manually.
What happens if I overbill a customer on a progress invoice?
If you overbill, you’ll need to issue a credit memo or a refund. In QBO, you can create a credit memo for the excess amount and apply it to the customer’s next invoice. To avoid this, double-check the percentage and the “previously billed” amount before sending.
Can I use progress invoicing for time-based projects (e.g., hourly work)?
Yes, but it’s less common. You can still create progress invoices by estimating the percentage of work completed or by billing based on hours worked up to that point. For time-based projects, you might find it easier to use QBO’s time tracking and then invoice for the actual hours, rather than using the percentage-based feature.
Final Tips for Using Progress Invoices Effectively
To get the most out of progress invoicing in QBO, keep these best practices in mind:
- Set clear payment terms (e.g., “Net 15” or “Due on receipt”) so customers know when to pay.
- Use the Projects feature to track all costs and income for each project, so you can see profitability in real time.
- Communicate with your customer before sending each progress invoice, explaining what work was completed and why the amount is what it is.
- If you’re unsure about the percentage complete, use a conservative estimate to avoid overbilling.
- Regularly review your unbilled receivables report to see which projects have work done but not yet invoiced.
Progress invoicing can significantly improve your cash flow and reduce the risk of large unpaid balances at the end of a project. By using QBO’s built-in tools or the manual method, you can create professional, accurate progress invoices that keep both you and your customers informed.