Milestone and Installment Invoicing: How to Set It Up Right
A €45,000 fixed-price project that only gets invoiced on delivery means months of financing your client: your team puts in the hours while the client holds on to the money. Installment invoicing solves that — provided you set it up properly. Done badly, it creates the opposite: forgotten installments, arguments about what counts as "done," and books that no longer add up. Here's how to get it right.
Pick a schedule that fits the project
Calendar-based. For example, 30% at kickoff, then equal monthly installments. It's the simplest schedule: predictable for the client, plannable for your cash flow, and immune to debates about progress. For most agency projects running three to twelve months, this is the best choice.
Milestone-based. Invoicing when a phase is completed ("after design sign-off"). It feels fair, but there's a catch: your invoice date depends on something that can be delayed — including by the client. Use milestone installments only when the milestone can be verified objectively, and put in writing what happens if the delay is on the client's side (for instance: the installment is invoiced no later than date X, sign-off or not).
Don't skip the upfront payment. A first installment of 20 to 40% on signing is standard practice and healthy: it covers your startup costs and immediately tests a new client's payment behavior.
Rule of thumb for the split: at any point in time, you should have no more than one month of work pre-financed. If the amount invoiced structurally lags the value of the work delivered, your work in progress keeps growing — and that's money standing still.
The bookkeeping: where it usually goes wrong
Installments don't live in the system. The schedule sits in the quote PDF and nowhere else. Nobody gets a signal on the invoice date, so installments get forgotten or sent late — typically during busy periods, exactly when your cash flow needs them most. Record the schedule as part of the project, with an amount and planned invoice date per installment, so that due installments are automatically staged as draft invoices.
Installments and time-and-materials work get mixed up. Many projects combine a fixed price with hours billed as you go (out-of-scope work, extras). Keep those streams separated per service: the installments on the fixed-fee service, the hours on their own service. A single invoice can include both, but the bookkeeping underneath must know the difference — otherwise you'll never be able to tell whether the fixed-price part was actually profitable.
The VAT obligation gets missed. VAT typically follows the invoice date, and in many EU countries you must invoice within a set window after the (partial) service was delivered — in the Netherlands, for instance, no later than the 15th of the month following the month of delivery. "Letting an installment sit" until next quarter isn't just bad for cash flow; it can put you on the wrong side of the tax rules. And of course, every installment invoice counts toward your continuous, gapless invoice numbering.
Nobody tracks the remainder. At delivery, it should be crystal clear what has already been invoiced and what's still outstanding. A project overview showing "invoiced €31,500 of €45,000, 1 installment remaining" prevents both double invoicing and forgotten final installments.
What to agree with the client
Three clauses in the quote prevent 90% of installment disputes: the full schedule with amounts and (expected) dates; the payment term per invoice (14 or 30 days); and the right to pause work when an installment goes unpaid. You'll rarely invoke that last one, but it changes every payment conversation.
Automatic payment reminders do the rest: a friendly nudge after the due date, without anyone having to keep a list.
Frequently asked questions
What's a typical installment split for agencies? Common and healthy: 30% on signing, 40% at the halfway point (or in monthly installments), 30% on delivery. Avoid schedules where more than half arrives only at delivery.
Does every installment need its own invoice? Yes — each installment is a regular invoice with its own number, date and VAT. That keeps your books airtight and gives the client clear payment moments.
How do I handle a client who keeps postponing a milestone sign-off? Put it in the quote: the installment falls due on a calendar date at the latest, even if sign-off is delayed by circumstances on the client's side. Without that clause, you're financing your client's delays.
Can installment invoicing be combined with retainers and hours on one invoice? In Horixa, yes: the monthly draft invoice bundles due installments, approved hours and subscription fees per client — you review and send.
Want installment schedules that invoice themselves? Try Horixa free for 14 days — installments, hours and subscriptions are automatically staged as draft invoices.