Construction progress billing in Quebec: a practical guide for specialty contractors

What is construction progress billing?

Construction progress billing lets a contractor request payment as work advances. Each application covers a defined interval, such as the 1st through the 25th of a month. It shows the total reached since the project began, then isolates the value added during that interval.

The calculation starts with the schedule of values. This table contains the full contract value and divides it into work lines such as mobilization, lighting, or commissioning. The team measures each line’s progress, applies the project’s holdback, and subtracts previously accepted amounts. The result is the amount requested for the current period.

Here is a small example. One work line is worth $10,000. The last application showed $4,000 of cumulative work. A new field record raises that total to $6,000. Cumulative progress is now $6,000, but only $2,000 was added during the current period. Holdback and taxes are then calculated under the project rules.

You may also hear progress claim, payment application, draw request, or progress invoice. The names are not always interchangeable. What matters is the contract: it defines what the document does, who reviews it, and when an amount becomes payable.

This guide uses payment application for the package sent to the customer.

Progress billing is therefore more than “sending a monthly invoice.” It is a coordination cycle across the field, project management, billing or accounting, and the person authorized to approve an external commitment.

Payment application, invoice, and payment are not always the same

A payment application can create an amount due. It can also ask a consultant, engineer, or architect to assess the work and issue a payment certificate. In the second case, the Canada Revenue Agency does not treat the application as an invoice when it is submitted. The goods and services tax or harmonized sales tax, abbreviated GST/HST, generally becomes payable on the earlier of two dates: the payment date or the date the contract makes the amount due. A separate invoice can make the tax payable earlier. Read the CRA’s general memorandum on construction contracts and progress payments.

That distinction has an operational consequence: track prepared, approved for submission, submitted, accepted or certified, invoiced, and paid as separate states. If your contract, tax adviser, or accounting policy uses a different sequence, model it explicitly. A file name should not decide the accounting or tax treatment.

Before the first cycle: set up the project rules

Billing problems often start when the project rules are unclear. Define those rules when the contract is awarded. This avoids rebuilding the same answers every month.

1. Read the billing instructions as a procedure

Pull these facts from the subcontract, purchase order, and customer instructions:

• the progress cut-off date;
• your internal deadline and the customer’s deadline;
• the required form, portal, or submission address;
• the billing period and payment-application numbering;
• required signatures, declarations, and supporting documents;
• the treatment of stored materials;
• the treatment of changes, holdback, and taxes;
• the reviewer and the authorized approver.

Turn each requirement into a field or task. A clause buried in a PDF is not yet an operational control.

2. Agree on the schedule of values before billing

The schedule of values (SOV) divides the contract value into measurable lines. Each line must let the project manager estimate progress. It must also let the reviewer understand the current amount.

Avoid one line called “electrical work” if the job needs separate tracking for mobilization, distribution, lighting, controls, and commissioning. Also avoid dozens of tiny lines that no one can maintain. Use enough detail to measure progress consistently and support each amount with evidence.

Confirm that the SOV total exactly matches the current contract value. When an approved change modifies that value, preserve the previous version and create a traceable revision.

3. Give every contribution an owner and a date

A dependable cycle has at least three responsibilities:

1. the field or project manager confirms progress and supporting documents;
2. billing or accounting reconciles the values and assembles the package;
3. an authorized person approves the exact package before submission.

Set the internal date ahead of the customer’s cut-off. If the payment application is due on the 25th, the first request for field progress cannot go out on the morning of the 25th.

The monthly progress billing cycle, step by step

For the first application, start from the approved schedule of values and the project rules. For later cycles, do not open a blank form. Carry forward the last submitted application and reconcile every decision tied to that exact revision. For each decision, record the lines and amounts it covers. Also record whether it supplements an earlier decision or expressly replaces it. If a decision concerns another submitted revision, keep the revisions and decisions separate until every link and amount reconciles.

Step 1: Establish the cycle baseline

For the first application, use the approved SOV and calculate cumulative progress and holdback to date. For later cycles, carry forward the SOV, approved changes, cumulative progress, and cumulative holdback from the last submitted application. Establish the accepted amount from every decision that still applies to that revision after reconciling its scope and amounts. Preserve every submitted application. A correction creates a new internal file revision and does not erase the submitted file or its proof. That internal revision does not automatically change the legal identity or date of the request.

Step 2: Collect progress from the source

Ask the project manager or site lead to confirm progress for each SOV line. Ask them to identify out-of-scope work, eligible materials, and variances. Link each supporting document to the relevant SOV line.

Use the detailed guide on how to measure construction progress to choose a method, record field observations, and reconcile the line’s cumulative result.

The evidence does not have to be enormous. It should let a reviewer answer two questions quickly: what moved? and why is this the amount?

Step 3: Reconcile cumulative progress

Compare the new cumulative value with the previous one. A line should not move backwards without an explanation. A percentage should not exceed 100% of its revised value. A negative current amount can be valid after a correction, but it should be visible and documented.

Step 4: Separate changes by status

Keep at least three groups:

• approved: the revised contract value can be updated;
• submitted or under discussion: the work and estimate stay visible without being presented as approved value;
• rejected or withdrawn: the decision remains in the history.

The contract or applicable law may allow a request for certain change work before the value is settled. That does not automatically make the estimate an approved change. Present the request in the required category and retain its calculation basis.

Step 5: Calculate, then reconcile a second way

First, calculate the current request before tax from the amount added during the period on each schedule-of-values line and the change in cumulative holdback. Then calculate it again from the contract totals: cumulative completed work and eligible materials, minus cumulative holdback and previously accepted amounts. Both methods must return the same result.

Step 6: Build the required package, not a generic package

Use the customer’s form and document order. Name files consistently. Confirm that the period, payment-application number, contract number, and total agree everywhere. Include the supporting documents that are useful or required; a larger package is not necessarily a clearer package.

Step 7: Review and approve

The reviewer checks the math and customer requirements. The approver confirms that this package can be submitted on the company’s behalf. Record who approved the package, when they approved it, and which version they approved.

Step 8: Submit and retain proof

Record the final file, channel, timestamp, recipient, and acknowledgement. If a portal transforms or replaces the uploaded document, also retain a copy of what was actually sent.

How to calculate the amount requested this period

Consider a fictional $400,000 subcontract. One $20,000 change has been approved. For this example only, the project has a 10% holdback. Taxes are excluded so the base calculation stays easy to follow.

The revised schedule of values totals $420,000. The following three lines form the $168,000 cumulative total. Another estimated $15,000 change remains pending, so it is excluded from both the revised contract value and this calculation.

Swipe horizontally to view all columns.

The next table applies holdback to the new cumulative value, then subtracts the $108,000 accepted for earlier periods.

Swipe horizontally to view all columns.

The same result can be checked from the current period. The previous $120,000 cumulative amount carried a $12,000 holdback at 10%. Holdback therefore increases by $4,800 in the current period:

$48,000 − ($16,800 − $12,000) = $43,200.

The short formula is:

Current requested amount = cumulative earned amount net of applicable holdback − previously accepted amounts.

This example is not a contractual rule. The contract and applicable rules determine the holdback rate and base. They also determine eligible materials, change treatment, and taxes. The CRA provides a specific GST/HST timing rule when legislation or a written construction agreement requires the holdback. Review the official CRA holdback guidance with your adviser.

Three quick tests for the result

1. The SOV total must equal the revised contract value.
2. Cumulative earned value must not exceed the eligible value of the SOV lines.
3. The current requested amount plus prior accepted amounts must reproduce the cumulative net amount exactly.

Free pre-submission progress billing checklist

Copy this checklist into your project template. Add customer-specific requirements to it instead of starting a second checklist in email.

In the following calendar, T is the planned day for submitting the application to the customer.

A simple T−7 to T+2 billing calendar

Swipe horizontally to view all columns.

Adapt the days to the contract. The useful principle is to make waiting visible: if field progress is missing at T−5, the team immediately knows which payment application is at risk.

Common mistakes that create rework

• starting from an old file instead of the last submitted application and every decision tied to it;
• missing the customer’s cut-off date or required portal;
• changing the contract value with a pending change;
• billing the month without reconciling the cumulative amount;
• claiming stored materials without required proof of eligibility, ownership, delivery, or storage;
• applying a customary holdback or tax treatment instead of the project’s rules;
• submitting a package whose summary and SOV totals disagree;
• treating “submitted” as “accepted,” then creating the invoice or recording an amount owed by the customer in accounting too early.

What changes on certain Quebec public contracts?

Quebec’s Regulation respecting prompt payments and the prompt settlement of disputes with regard to construction work came into force in 2025. It applies progressively to covered public construction work contracts and related public subcontracts. It is not a universal rule for every private or public construction project in Quebec.

For a potentially covered project, record the public body, work type, main-contract relationship, tender and contract dates, and the current written payment instructions during setup. The regulation prescribes content, timing, supporting-document, refusal, and payment rules when it applies. Do not copy dates or thresholds from a generic example into the project calendar.

Internal file control must also preserve the legal identity of the document. When section 8 of this regulation applies and the parties agree to amend a submitted request, the amended document remains the same request and keeps its original submission date. Preserve a new internal file revision for history, but do not assign a new legal identity or date without checking the applicable rule.

Use the official English text of the regulation, the Quebec government overview in French, and the signed contract to determine scope and current instructions. Obtain qualified advice when an applicability decision or legal deadline affects a right or remedy.

After submission: track the accepted amount through payment

Submission ends package preparation. It does not end the billing cycle. As soon as the file goes out, create a follow-up record with the requested amount, date, recipient, next milestone, and responsible person.

To apply this method across multiple applications, copy the tracker from requested amount through payment.

If the request is accepted in full

Record the accepted or certified amount and date. Then trigger the invoice or accounting entry required by the contract and your procedures. Keep the relationship between the application, decision, invoice, and payment intact.

If part of the request is rejected or corrected

Keep the submitted amount and the accepted amount. Record each variance and its reason. Link the relevant supporting document or contract clause. Assign the next action. Create a new internal file revision for every correction without assuming that it becomes a new request under the contract or an applicable rule.

If payment does not arrive

First confirm that the package was received, no document is missing, and the amount has been accepted. Follow up with facts: application number, period, requested amount, accepted amount, due date according to your records, and submission proof. Escalate under the contract and applicable remedies, with professional advice when needed.

Keep preparation, approval, submission, the customer decision, accounting treatment, and payment distinct. Their exact order depends on the contract and your procedures.

Your accounting system remains the official source for entries, invoices, and payments. The billing cycle keeps the supporting documents and decisions behind each amount.

Frequently asked questions

How do you calculate construction progress billing?

Calculate the cumulative eligible value of work and materials, apply the project’s holdback, then subtract amounts previously accepted. The current requested amount must reconcile with the schedule of values and cumulative total. The contract controls what is eligible and how it is treated.

What belongs in a construction payment application?

The contract decides. A typical package may include a summary form, updated SOV, changes, holdback, taxes, progress evidence, compliance documents, and signatures. Certain covered Quebec public contracts also have prescribed information requirements.

Is a payment application an invoice?

Not always. When the request asks someone to assess the work and issue a payment certificate under the contract, the CRA says it is not considered an invoice at the request stage. Confirm the contractual, accounting, and tax treatment for your project.

Can a pending change be included in a payment application?

It depends on the contract and applicable framework. Always separate estimated value from approved value, label the change’s status, and retain the calculation basis. Do not silently change the revised contract value.

How does holdback affect the current requested amount?

Holdback generally reduces the cumulative amount payable using the base and rate required by the project. Its tax treatment and release follow the applicable law and written agreement. Configure them explicitly; do not infer them from the form or province alone.

What is the best way to avoid losing a billing cycle?

Work backwards from the customer deadline. Collect field progress several days earlier, review the SOV and supporting documents, and reserve time for approval. Confirm receipt soon after submission. The T−7 calendar above is a practical starting point.

Official sources and scope

Legal, tax, and contractual rules change. This article was reviewed against these official sources:

• Canada Revenue Agency: construction contracts, progress payments, payment applications, and holdbacks
• Revenu Québec: when to collect the GST and QST
• Gouvernement du Québec: prompt payments and dispute settlement overview
• LégisQuébec: Regulation respecting prompt payments and prompt dispute settlement

This content is for information only. It is not legal, tax, or accounting advice. Always verify the contract, the current rules, and advice specific to your circumstances.

Sources verified on September 1, 2026. To report a correction, contact Aplon.

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