The Procurement Glossary » Progress Payment

Progress Payment

Finance & Payments

Definition

A payment made in stages as work progresses, typically tied to milestones on a project or large order.

Explanation

Progress payments align cash outflow with delivered value, reducing the buyer's risk on long engagements and easing the supplier's cash flow. They are defined against milestones with acceptance criteria.

Example

The construction contract pays 25% at each of four milestones as progress payments.

Related terms

• Milestone — A defined checkpoint in a project or contract, often tied to a deliverable and a payment.
• Retention Payment — A portion of payment withheld until a supplier fully completes the work and any defects are remedied.
• Capital Expenditure (CapEx) — Spending on long-lived assets such as equipment, buildings or vehicles, capitalised and depreciated over time.
• Cash Flow — The movement of money into and out of a business over time.

Frequently Asked Questions

What is Progress Payment?

A payment made in stages as work progresses, typically tied to milestones on a project or large order. Progress payments align cash outflow with delivered value, reducing the buyer's risk on long engagements and easing the supplier's cash flow. They are defined against milestones with acceptance criteria.

Can you give an example of Progress Payment?

The construction contract pays 25% at each of four milestones as progress payments.

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