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Progress Billings vs. Milestones

March 6th, 2010 · 1 Comment

Many times a company will have a long term contract to perform services for another firm.  In these circumstances, the company will bill the out the customer for part of the services rendered, even though the entire project hasn’t yet  been completed.  An example would be a construction company contracts with a city to build a water tower. They might bill the city every month in order to rely on some cash coming in each month so they can pay bills.  This is known as progress billing.  Factoring companies are not able to advance funds in these situations because the service in total has not yet been accepted by the customer.

When the contract calls for a project in which a variety of tasks are to be completed along the way, an invoice factoring relationship can usually be developed.  This is because there are milestones along the way.  For example, lets say a construction company contracts with the city to erect structures around several park areas.  The company bills the city each time they have finished work at a park.

Since there has actually been a service total completed that relates to the bill, the factoring company can usually work with the company to provide much-needed working capital.

Tags: cash flow · factoring accounts receivable · factoring invoices · factoring receivables · receivables factoring · receivables financing

1 response so far ↓

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