| Home | Resources | Glossary | |
Date Based Milestone |
|
Term Definition Organizations may use date based milestone billing to assure clients that they are invested in successfully meeting the client's need or resolving their problem. Rather than taking a large upfront payment, the client is billed at a fixed date of the project. For example, a contract might require billing ½ of the contract amount on January 1, and a second payment of 1/3 on March 1 and the final 1/3 upon project completion on April 5. Milestone billing may also be used for high dollar projects, or projects that will last for a long period of time. For example, for a $100,000 project, the organization might require a $10,000 payment at the start of the contract, $20,000 at the midpoint and $70,000 at the contract conclusion. Milestone billing is good for clients as they are given the confidence that the contractor has a financial incentive to complete the project requirements as agreed upon. Contractors benefit in that the client has an incentive to pay. In essence milestone billing creates a partnership between the client and contractor. Many consultants may use milestone billing and fixed billing in their practices. Typically, milestone billing will be used for larger scale projects as it provides them with a steady cash flow over the life of the project. If a project will take several months to complete, the consultant's resources may be utilized to capacity. Milestone billing provides them with revenue at fixed points rather than waiting until the completion to get one large payment. Area of Application Related Terms
|
|
