How to Create a Milestone Billing Plan

A milstone billing plan benefits both company and client

A milestone billing plan is a project payment plan in which a company is paid a specific amount upon the completion of each of a number of milestones. The milestones will be specific to the job and may indicate the completion of a certain percentage of the project or specific tasks. Both the company and customer benefit from such a plan. The customer only pays as the work is completed and will be more confident that future work will be done. The company will not have to wait until all of the work is completed to receive its money.

Instructions

1. Decide on the total project cost based on estimates of material costs, labor costs and markup. You cannot divvy up the total payment until you know how much money will be earned. This can be agreed upon between you and the client before or after the billing plan is created.

2. Calculate how much money you need during the project's progression. You may need certain funds to complete the job such as money for materials. You need to know when you will need the funds so that this can be built into the plan and allow you to have the resources to complete the job.

3. Create a timeline for the project. It should include all of the tasks and the estimation for their completion. Mark down the times that the job will be 25% completed, half completed, etc., if these are to be your milestones.

4. Decide how many payments to include in the billing plan. This will depend on how quickly the money is needed and the scope and length of the plan. Longer plans often require more payment periods.

5. Decide how much money to allot to each milestone. It does not need to be equal and should correspond to the milestone. It can be a set amount or a percentage of the total cost.

6. Write all of the details of the milestone billing plan into a contract. To avoid conflict and confusion, everything should be clearly labeled including the exact milestones, the amount of payment for each and the expected completion dates. Explicitly explain what happens if the work is not performed exactly on schedule.

7. Work with the customer to ensure that the plan meets everyone's needs. Depending on the size of the project, you may create the billing plan with the customer or on your own. Even if you create it by yourself, you can ask for input from the client prior to the plan.

8. Send an invoice to the customer every time a milestone is reached. Payment should be remitted so that the project can continue.

References

• Tenrox: Milestone Billing