If you run a project-based business, you know that your cash flow can be, well, a wild ride. One month you’re feeling pretty good, the next you’re wondering how you’ll cover expenses. It’s a common problem, and one that we at NorthStar Bookkeeping deal with often. We’ve worked with countless clients who were frustrated by their unpredictable income. They were great at what they did – seriously talented – but the constant cash flow ups and downs were holding them back. That’s where progress billing comes in. Done right, it’s an absolute game-changer for businesses that want to create a more stable, more predictable financial future.
“We see so many business owners who are phenomenal at their craft but get tripped up by inconsistent cash flow,” says Heather Kirstein, co-owner of NorthStar Bookkeeping. “Progress billing helps them take control of their finances. It gives them the breathing room they need to focus on what they do best.”
The Problem with Traditional Invoicing (and Why It Can Seriously Hurt Your Business)
You know that gap you often get with traditional invoicing? The one between finishing a project and actually seeing the money? It can be a real pain. You’ve put in the hours, the effort, maybe even blood, sweat, and tears to deliver great work, and then… you wait. Weeks, sometimes even months, before that payment hits your account. That kind of delay can disrupt your cash flow.
- Cash Flow Crunch: Okay, picture this. Payroll is looming. Your vendors are sending reminders (maybe even not-so-friendly ones). And that big project you just knocked out of the park? You’re still waiting on the payment to clear. This kind of crunch makes it incredibly difficult to cover your everyday operating costs, let alone plan for future investments. You might even find yourself leaning on your line of credit a little too much, which, let’s be honest, isn’t a great place to be.
To read more about calculating cash flow read our article: How to Calculate Cash Flow: A Comprehensive Guide
- Financial Visibility? Forget About It: When your revenue is this unpredictable, it’s like trying to drive through a thick fog at night. You can’t really see what’s ahead. Forget about accurate forecasting. Making informed business decisions? Almost impossible. It’s a guessing game and a risky one at that.
“Progress billing changes all that,” explains Paul Yee, NorthStar co-founder. “It’s about getting paid as the project progresses, not just at the end. It creates a much more consistent, and way more predictable, income stream.”
How Progress Billing Works
Instead of one lump-sum payment at the very end of a project, progress billing breaks down project payments into smaller, more manageable chunks. You get paid at specific milestones throughout the project. Here’s how it can help:
- Consistent Cash Flow: You receive payments throughout the project lifecycle. This makes it way easier to manage expenses, pay your bills, and plan ahead. It’s like having a steady paycheck but for your business.
- Reduced Financial Risk: You’re not waiting on one massive payment that could be delayed or even disputed. This spreads out the risk.
- Better Client Communication: Regular invoicing keeps clients engaged and informed about project progress. It’s all about transparency.
NorthStar’s Secret Sauce: Tailored Progress Billing Strategies
We don’t just preach the benefits of progress billing. We help businesses like yours implement it effectively. We know that every business is unique. That’s why we take a customized approach. Here are some of the key strategies we use:
- Defining Milestones That Actually Make Sense: We work with you, one-on-one, to identify milestones that are meaningful, measurable, and truly aligned with your project workflows. This might involve a percentage-of-completion approach, a units-of-delivery method, or even a hybrid system. The key is, and this is important, to create a structure that works for your specific business.
- Ironclad Contracts: We help you incorporate clear, easy-to-understand progress billing terms into your contracts, right from the get-go. This includes detailed payment schedules, precise milestone definitions, and, importantly, a process for handling any disagreements that might, on a rare occasion, pop up. If your industry uses standardized contracts, like in construction or manufacturing, having this all documented is absolutely essential.
- Revenue Recognition Done Right: We ensure your bookkeeping practices are fully compliant with Generally Accepted Accounting Principles (GAAP) for progress billing. This might mean recognizing revenue based on the percentage of work completed, even before you’ve sent out an invoice. It’s all about accuracy and compliance.
- Leveraging the Power of QuickBooks Online: We’re QuickBooks Online experts, and we know how to use this powerful software to streamline your progress billing. From automated invoicing to real-time project tracking and insightful financial reports, we’ll help you harness the full potential of QuickBooks.
Busting the Myths About Progress Billing
“There are some common hesitations we hear about progress billing,” says Yee. “But most of them simply aren’t true.”
- Myth #1: “It’s too complicated to set up.” Not with the right help! NorthStar specializes in making the transition to progress billing smooth and efficient. We handle the heavy lifting, so you don’t have to.
- Myth #2: “My clients won’t like it.” Actually, most clients appreciate the transparency and regular communication that comes with progress billing. When explained clearly, it’s a win-win.
- Myth #3: “It’s only for big companies.” Absolutely not! Progress billing can be adapted for businesses of all sizes, from solo freelancers to large enterprises.
Ready to Ditch the Cash Flow Rollercoaster?
If you’re tired of the unpredictable income and want to create a more stable, predictable financial future for your project-based business, NorthStar Bookkeeping can help.
How NorthStar Can Help You Transition to Progress Billing:
We’re not just about handing you a generic plan and sending you on your way. We’re about partnering with you, understanding your unique business, and crafting a progress billing system that truly fits.
It all starts with a conversation. A real, no-pressure conversation where we get to know your business, your current accounting practices, your pain points, and your goals for the future. It is important we understand where you are now, and where you want to be. We’ll be there to answer your questions, and guide you through whether progress billing is the right solution for you.
Contact us today to schedule your consultation. We’re based in Orange County, California, but we work with businesses all across the country. Let’s work together to build a more predictable and profitable future for your business.