Progress billings have become a vital financial strategy for Australian businesses tackling large, long-term projects. With the construction, engineering, and IT sectors booming into 2025, more companies are turning to progress billings to keep cash flow healthy and projects on track. But how do progress billings work, and what do the latest policy updates mean for businesses and clients alike?
What Are Progress Billings and Why Are They Important?
Progress billings allow businesses to invoice clients at intervals as work is completed, rather than waiting until a project’s end. This method is especially common in industries where projects span months or even years, such as:
- Commercial and residential construction
- Large-scale manufacturing
- IT and software development
- Engineering and infrastructure projects
For example, a Sydney-based construction firm building a new apartment complex might bill the developer after each major stage—site prep, foundation, framing, fit-out—rather than sending one massive invoice at completion. This staged approach helps both parties by:
- Ensuring the contractor has funds to pay for materials and labour as the project progresses
- Giving clients transparency on spending and project milestones
- Reducing the risk of cash flow crises and payment disputes
2025 Policy Updates and Compliance Considerations
Recent updates in Australian financial and tax policy are shaping how progress billings are managed:
- ATO Guidance: The Australian Taxation Office clarified in late 2024 that GST is generally payable on each progress payment, not just the final invoice. This requires precise recordkeeping and GST calculation on every stage.
- Contract Law Changes: Amendments to the Security of Payment Acts in NSW, Victoria, and Queensland (effective January 2025) now require clearer documentation for each progress claim, including work completed, value claimed, and supporting evidence. This is designed to reduce disputes and speed up payments to subcontractors.
- Digital Invoicing Standards: The Commonwealth’s push for e-invoicing means most government contracts (and many private sector ones) now mandate digital progress claims. This not only speeds up processing, but also provides a clear audit trail for all parties.
For instance, if a Melbourne IT consultancy is developing a custom platform for a government agency, they must submit progress claims via the Peppol e-invoicing network, with each milestone clearly documented and matched to contractual deliverables.
Best Practices for Effective Progress Billings
To make the most of progress billings in 2025, Australian businesses should:
- Set Clear Milestones: Work with clients to define project stages up front. Each milestone should be specific, measurable, and agreed in writing.
- Use Robust Software: Cloud-based accounting platforms like Xero and MYOB now offer automated progress billing features that streamline invoicing, track payments, and integrate with project management tools.
- Maintain Detailed Records: Store all supporting documents—photos, delivery dockets, site reports—linked to each progress claim. This is essential for compliance under new Security of Payment rules.
- Monitor Cash Flow: Regularly review incoming payments against outgoing costs. If a client is late on a progress payment, act quickly to resolve issues and avoid a funding crunch.
- Communicate Proactively: Keep clients informed of upcoming billings, changes to project scope, or unexpected delays. Transparency builds trust and reduces the risk of disputes.
Real-World Example: Progress Billings in Action
Consider a Brisbane-based civil engineering firm contracted for a $10 million road upgrade. The project spans 18 months and includes five defined phases. The contract specifies that 20% of the total fee is invoiced at the completion of each phase, with supporting documentation and sign-off from both sides.
Thanks to progress billings, the firm can:
- Pay suppliers and subcontractors on time, improving relationships and avoiding costly delays
- Maintain steady cash flow to cover operational expenses and invest in new equipment
- Quickly spot if a client is falling behind on payments and address issues before they escalate
Meanwhile, the client gains peace of mind by tracking project spend and performance at every stage, rather than facing a budget blowout at the end.
Looking Ahead: The Future of Progress Billings in Australia
With the ongoing digital transformation of Australian business, progress billings are set to become even more efficient and transparent. As regulations tighten and clients demand greater accountability, expect to see further automation, real-time reporting, and smarter integrations between project management and accounting systems.
For any business tackling large projects, mastering progress billings isn’t just a compliance box-tick—it’s a competitive edge.
