Fundamentals

Creating Progress Invoices Correctly: How to Secure Your Cash Flow

For larger projects, progress invoices are essential. Learn how to correctly bill partial payments and avoid common mistakes.

Clever Invoice Team · ·9 min read read

Creating Progress Invoices Correctly: How to Secure Your Cash Flow

For larger contracts, it's common practice not to wait until the end to invoice. With progress invoices (also called advance invoices or partial invoices), you secure your cash flow and reduce risk. This guide shows you how to do it right.

What Is a Progress Invoice?

A progress invoice is an invoice for a partial amount of a total contract, issued before completion of the service.

Typical Use Cases

  • Construction projects: Billing based on construction progress
  • Software development: Payment at milestones
  • Consulting projects: Monthly installments
  • Trades: Material costs upfront
  • Creative projects: 50% upon order confirmation

Important: A progress invoice is not an estimate - it refers to a specific part of the agreed service.

Progress Invoice vs. Final Invoice

CriterionProgress InvoiceFinal Invoice
TimingDuring the projectAfter completion
AmountPartial amountRemaining balance
ServicePartially deliveredFully delivered
VAT timingUpon paymentUpon service delivery

The Three Types of Partial Payments

1. Advance Payment (Prepayment)

  • Payment before work begins
  • Often 10-50% of total amount
  • Typical for custom orders

2. Progress Payment

  • Payment during service delivery
  • Related to already delivered partial services
  • Typical for longer projects

3. Final Payment

  • Payment after completion
  • Remaining balance after deducting all progress payments
  • With listing of all previous payments

Required Information on a Progress Invoice

A progress invoice must contain the same mandatory information as any other invoice:


1. Complete name and address of the provider
2. Complete name and address of the customer
3. Tax ID number or VAT ID
4. Invoice date
5. Sequential invoice number
6. Service description
7. Net amount
8. Tax rate and tax amount
9. Gross amount

Additional Requirements for Progress Invoices

  • Reference to progress nature: "Progress Invoice No. 1" or "1st Partial Invoice"
  • Reference to total order: Order number, date, description
  • Proportion of total amount: "Progress payment: 30% of €10,000"

Step by Step: Creating a Progress Invoice

Step 1: Agreement in the Contract

Establish in the contract or quote:

  • Number and amount of progress payments
  • Due dates (e.g., at milestones)
  • Payment terms

Example Contract Clause:

Payment Schedule:
- 30% upon order confirmation (advance payment)
- 30% after completion of structural work
- 30% after completion of interior work
- 10% after acceptance (final invoice)

Step 2: First Progress Invoice


Progress Invoice No. 2025-A001

Project: Website Redesign
Order No.: 2025-042
Order Date: October 1, 2025
Total Order Value: €10,000.00 net

1st Progress Payment (30% upon order confirmation)

Item  Description                           Amount
1     Progress payment Website Redesign     €3,000.00
      (30% of total order)

      Subtotal net                          €3,000.00
      Plus 19% VAT                            €570.00
      ─────────────────────────────────────────────
      Total Amount                          €3,570.00

Step 3: Additional Progress Invoices

For each subsequent progress invoice:

  • Continue numbering (A002, A003, ...)
  • Reference to previous progress payments
  • Cumulative presentation possible

Step 4: Final Invoice

The final invoice is the most important - this is where everything is settled:


Final Invoice No. 2025-S001

Project: Website Redesign
Order No.: 2025-042

Total Service:
Item  Description                           Amount
1     Website Redesign complete             €10,000.00

      Subtotal net                          €10,000.00
      Plus 19% VAT                           €1,900.00
      ─────────────────────────────────────────────
      Gross Total                           €11,900.00

Less previously paid progress payments:
- Progress payment 1 dated Oct 1, 2025      -€3,570.00
- Progress payment 2 dated Nov 1, 2025      -€3,570.00
- Progress payment 3 dated Dec 1, 2025      -€3,570.00
      ─────────────────────────────────────────────
      Remaining Balance Due                  €1,190.00

VAT on Progress Invoices

When Does VAT Liability Arise?

For progress invoices, the accrual principle applies:

  • Cash basis: VAT is due only upon receipt of payment
  • Accrual basis: VAT is due upon invoice issuance

Most self-employed individuals use cash basis accounting - so VAT is only due when payment is received.

Correction in the Final Invoice

In the final invoice, all VAT amounts are correctly listed - the already paid progress payments are deducted gross.

Avoiding Common Mistakes

1. Missing Progress Indicator

❌ Regular invoice for partial amount ✅ Clearly mark as "Progress Invoice"

2. No Contractual Basis

❌ Progress payments without prior agreement ✅ Establish payment schedule in quote/contract

3. Final Invoice Without Deductions

❌ Total amount without considering progress payments ✅ List and deduct all progress payments individually

4. Incorrect VAT Treatment

❌ Paying VAT twice (on progress and final invoice) ✅ Handle VAT correctly for cash/accrual accounting

5. Vague Service Description

❌ "Progress payment Project X" ✅ "1st progress payment for Website Redesign (30% upon order confirmation)"

Progress Invoices in Accounting

When Issuing the Progress Invoice


Accounts Receivable            €3,570.00
  to Advances Received                     €3,000.00
  to VAT (not yet due)                       €570.00

Upon Receipt of Payment


Bank                           €3,570.00
  to Accounts Receivable                   €3,570.00

VAT (not yet due)                €570.00
  to VAT (due)                               €570.00

On Final Invoice

The advances are reversed and revenue is recognized.

Checklist: Progress Invoice

  • [ ] Progress payment contractually agreed
  • [ ] Marked as "Progress Invoice"
  • [ ] Reference to total order established
  • [ ] All mandatory information present
  • [ ] Proportion of total amount visible
  • [ ] Invoice number sequential
  • [ ] VAT correctly shown

Conclusion

Progress invoices are your tool for better cash flow on larger projects:

  1. Secure contractually: Agree on payment schedule in advance
  2. Mark correctly: Always identify as progress invoice
  3. Close cleanly: Final invoice with all deductions
  4. Mind the accounting: Book advances correctly

With Clever Invoice, you create progress invoices in seconds - with automatic numbering and correct final invoicing.

Frequently asked questions

How many progress invoices can I issue?

As many as contractually agreed. 2-4 progress payments are typical for larger projects. The important thing is that the customer has agreed in advance.

Does the customer have to accept progress invoices?

Only if contractually agreed. Without agreement, the customer has the right to pay only after complete delivery of service.

What happens if the customer doesn't pay a progress invoice?

You can stop work (right of retention) and charge late payment interest. In case of significant delay, termination may also be possible.

What is the maximum amount for progress payments?

There is no legal upper limit. 10-50% per installment is typical. For consumers, stricter rules may apply (e.g., in construction law max. 90% before acceptance).

← Back to blog