Milestone billing means distributing the total amount to be billed over multiple billing dates in the billing plan when pre-defined milestones are reached. As each milestone is successfully reached, the customer is billed either a percentage of the entire project cost or simply a pre-defined amount agreed upon prior to the project.
This kind of engagement is possible with projects with proper estimation and an expected delivery date agreed between the 2 parties.
See example below highlighting the use of milestone bound payment:
Consultant will be paid a $2,000 advance on this contract upon execution. They will then be paid $3,000 for successful completion of the six month milestones, and an additional $5,000 for the twelve month milestones, which complete the drafting of the outsourcing plan. At this point, it is agreed that either party has the right to terminate the contract upon submission of a written statement that states why they believe the plan implementation will not proceed or will not lead to results specified.
During plan implementation, an additional $5,000 will be paid at 18 month s and again at 24 months on successful milestone completion. For the two successive years following completion of this contract the consultant will also be paid a success fee of 50% of all net revenue above $50,000 up to a limit of $25,000
