Billing · 3 min read
Milestone billing looks simple on paper, but in practice it leads to delays, oversights and disputes. A few rules to make it really work.
Milestone billing is one of the most common models in professional services. The client pays for tangible results, the supplier gets paid during the project rather than only at the end, and the commercial relationship rests on verifiable deliverables. In theory, it is a balance that works for both sides.
In practice, though, there are many steps between delivering a milestone and getting paid, and each one can introduce delays. Anyone who has run milestone-based projects knows the feeling of discovering, at quarter end, deliverables completed long ago and never invoiced.
It all starts with the definition. A useful milestone has a clear name, an amount, a due date and, above all, an acceptance criterion agreed with the client. Writing “development phase complete” is not enough: you need to state what will be delivered and how the client will confirm receipt.
It is also wise to avoid milestones that are too large. An installment worth half the contract value, tied to a release that depends on many external factors, exposes the business to long stretches without income. Splitting the work into smaller stages makes cash flow steadier and keeps discussions focused.
Finally, agree with the client at the contract stage who is authorized to sign off a milestone, and how. A simple email from the designated contact can be enough, as long as it is clear from the outset who needs to send it.
A well-defined milestone
The most common weak spot is the distance between whoever completes the milestone and whoever issues the invoice. The project manager closes the deliverable, but the finance team only hears about it when someone remembers to mention it. The solution is a direct link: as soon as a milestone is marked as completed, a billing event should be created and made visible to the finance team.
A billing event is not yet an invoice. It is a pending item that the finance team checks, for example by confirming that the client has signed off, and then turns into an invoice. Keeping the two steps separate prevents invoicing too early while making sure nothing is forgotten.
Time-and-materials projects work in a similar way: hours and expenses approved during the period generate billing events to be turned into invoices.
Three views make a big difference in day-to-day work. The first covers overdue milestones, those whose due date has passed without being completed: they are the first sign of a project in trouble. The second covers pending billing events, which shouldn’t sit idle for more than a few days.
The third is the aging of invoices issued but not yet paid. An invoice past its agreed payment terms needs a reminder, and the project manager, who deals with the client every day, is often the best person to find out what is going on.
Checking these three views every week, even for a few minutes, is often enough to stop delays from piling up until the end of the quarter.
When projects and invoices live in different systems, keeping all the pieces together takes discipline and frequent meetings. In Sales, milestones are managed on a shared Kanban board and, when a milestone is completed, the billing event is created automatically and appears among the items to be invoiced. The dashboard shows overdue milestones and pending invoices, and the reports include receivables aging.
Whatever the tool, one rule matters most: no completed milestone should be left without a billing event, and no event should stay pending without a reason everyone knows.
No completed milestone should ever be left without a billing event.
Keep reading
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