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What is Milestone Billing? Why Your Firm May Need a Phased Billing Model

Oct 13, 2022 | By BQE Software | 0 Comments

Topics: Billing/Invoicing

Milestone billing, also known as phased billing, is a popular billing model in the A/E and professional services industries due to the industries’ project-driven revenues. To determine if this phased billing model is right for your firm, consider the length of your projects. If you often conduct mid to long-term projects and would like to avoid scope creep, a phased billing model can be a beneficial option for you. Phased billing is excellent at defining objectives, deadlines, and deliverables.  

What is Milestone Billing? 

Milestone billing allows you to bill in phases, hence the description “phased billing”. Using the phased billing model, you can bill for project work by each milestone that you define with your client. When a milestone is reached, your client is billed for the designated partial amount of the total amount of the project. Milestones can be billed for services that involve multiple work orders and resources delivered over time.  

Each milestone is essentially a sub-goal that helps to achieve the main project goal. When you use the phased billing model, instead of invoicing every couple of weeks, you can set up a phased billing agreement where your client pays for each milestone/deadline as it’s reached.  

The amount due at each milestone and each deadline can defer from project to project, this model is project-specific and will be unique to each new case.  

Phased Billing vs Project-based Billing 

You’re probably most familiar with project-based billing. Project-based billing offers upfront pricing with all your project costs already negotiated and resolved before the project even begins. This type of billing is great for short-term projects; however, it can be unsuitable for longer projects. This is where milestone billing comes in. 

Milestone billing allows you to space out invoices to make larger projects more manageable. This is especially beneficial for the client and a good way to get them to agree to a larger, more expensive project that they may not want to pay for all of it up front. It’s also helpful for your firm to maintain a steady cash flow over a longer length of time and set goals for your team to work toward.  

A phased billing model can help structure budgets and make sure everyone stays within those budgets if the project takes longer than anticipated. It’s also a beneficial way to visualize a relationship between payment and progress.  

When Not to Use Phased Billing 

A phased billing model isn’t for everyone. If your project doesn’t have concrete deliverables, milestone billing might not be the best option. Administrative work is a good example of where a phase billing model wouldn’t work. Administrative tasks are typically ongoing, without any milestones, so hourly compensation or a salary would make more sense in this case.  

If you’re working on a smaller project, you can still use milestone billing, but if there are not a lot of deliverables, this type of billing could just cause confusion. Instead, for shorter projects, paying directly at the start makes more sense.   

Phased Billing and Time Tracking 

When you’re using a phased billing model, it’s important to make sure you’re tracking time alongside it. Every milestone will have its own unique amount of time and effort involved. If there is ever a discrepancy when it comes to the estimated vs actual time spent on a milestone, your time tracking can resolve this quickly.  

Time tracking software, such as BQE CORE, can help streamline milestone billing with the following benefits: 

  • Track and link travel expenses and receipts to their individual projects for smooth billing 
  • Upload photos of receipts to create digital expense records that includes tax and expense type 
  • Track time accurately for projects, overhead, and time off 
  • Capture time down even to the exact second with pause-and-play timers connected to timecards 
  • Eliminate manual entry that can cause errors for milestone billing with automated copied timesheets 
  • Track time and expenses anywhere with BQE CORE’s mobile app 

Phased Billing Automation with BQE CORE 

BQE CORE lets you create unique schedules for project milestones. Easily split invoices ensure all parties are appropriately accounted for. This includes: 

  • Invoice values based on fixed amounts or total contract %'s. 
  • Distribute services and expenses to one or more clients. 
  • Standard contract types: hourly, fixed fee, cost plus, unit cost, and percentage. 

You can ensure your clients receive project invoices on time, every time. With BQE CORE you can create a customizable process flow that meets your firm's unique needs. 

  • 20+ standard invoices & customizable templates. 
  • Create invoices based on preferred schedule and frequency. 
  • Schedule automatic invoicing based on variable values or contract types and retainers. 

Not all firm management software has the phased billing capabilities to help you easily incorporate milestone billing into your projects. And with so many firms working on large projects, this feature is incredibly important. BQE CORE not only includes phased billing, but also provides an all-in-one platform that incorporates accounting, invoicing, time and expense tracking, project management, HR, and more.  

To start automated milestone billing today, try a free demo of BQE CORE.  

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