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The most common type of construction payment is a net payment, meaning the invoice is due a set amount of days from the issue date. For longer projects, it's typical to pay an upfront deposit and then to pay the contractor monthly until the job is finished.

Payments are typically based on a percentage of completed work, like when a project reaches 25%, 50%, and 75% completion, or when certain parts of the project are done. For instance, a payment could occur when the below-grade waterproofing work is completed or when the exterior is dried in.

Progress billing is calculated on a to-date basis by multiplying the project's percentage complete by the total project price. As it meets milestones, the contractor submits an invoice for completed work.

For example, a contractor may submit an invoice based on 50% of work being completed, but the owner maintains only 40% was done and pays ingly.

Difference between milestone and progress billing A perfect example is the percentage of completion billing style, in which progress payments are based on the percentage of work completed. Milestone billing, on the other hand, will trigger the billing process once predetermined deliverables, or milestones, are hit.

A Payment Certificate is a document produced by a contractor that contains financial information relating to a payment to a subcontractor for ongoing or completed project work.

Net 10, Net 30, or Net 60 (found on the invoice) simply indicates that the contractor's payment is due 10, 30, or 60 days from the date of the invoice, respectively. Risks: This is the most common payment term for independent contractors, and there are few risks associated with it.

What are progress payments? Simply put, progress payments are based on the percentage of the work that is complete. ... Time and material contracts (T&M) are based on the actual hours worked and the materials purchased for the job during the time you are billing for.