Progress billing for contractors: how to calculate and record it

Published 11 October 2026 · Muqawil

A progress bill (mustakhlas) is how work on site becomes money in the bank. A small mistake in calculating or recording it means profit that isn't real, or money you are owed that nobody chases. Here is the process step by step.

What is a progress bill?

A periodic claim the contractor submits to the owner or main contractor for work done in a period — usually a month — after the consultant approves it. It is cumulative: start from the total work done since the start of the contract, subtract what was already certified, and what is left is this period's amount.

What goes into it

• Total work done to date (quantities × BOQ rates)
• Less: total of previous certificates
• = work this period
• Less: retention (usually 5–10% per the contract)
• Less: advance payment recovery
• Less: other contract deductions
• = net due before VAT

Worked example

Contract SAR 1,000,000; 10% advance (SAR 100,000) recovered at 10% per certificate; 10% retention. By month three 40% is done and SAR 250,000 of work was certified before.

How and when VAT applies to progress bills and retention follows the VAT law, ZATCA guidance and your contract — confirm the method with your tax adviser.

Recording it

Revenue is the value of work done (SAR 150,000), not the net cash. Retention is a receivable you collect later, not a reduction of revenue.

Common mistakes

• Booking revenue at the net amount, so retention disappears from the books
• Forgetting advance recovery on some certificates
• Calculating from monthly quantities instead of the cumulative total
• Not linking project costs to its certificates, so profit is only known at the end

How Muqawil helps

Invoices, certificates, expenses and payroll are linked to each project, so contract value, received, spent, retention and margin are on one screen, and the client statement shows what is still owed.

Questions