• Choose Your Billing Model First
  • Tool Comparison by Billing Model Coverage

Project-based businesses (agencies, consultants, contractors, design studios) lose money in one of two places: an invoicing tool that cannot model their billing structure correctly, or a billing structure that does not match how they actually scope work. This guide focuses on tools that handle the five billing models project work requires (milestone, retainer, time-and-materials, progress billing, change order) and explains which model fits which kind of work.

How we verified this We tested billing model support against the current feature pages of each tool listed and confirmed pricing on each vendor's pricing page. Where a tool claims to support a billing model but only via a workaround, we say so. Pricing verified May 2026.

Key Takeaways

  • Five billing models cover almost every project-based engagement: milestone (fixed amounts tied to deliverables), retainer (recurring monthly fee), time-and-materials (hourly plus expenses), progress billing (percentage complete), and change order (scope additions billed on top).
  • Most invoicing tools handle one or two of these models cleanly. Few handle all five without workarounds.
  • According to the Intuit 2025 Small Business Late Payments Report, U.S. small businesses are owed $17,500 on average from unpaid invoices, and 47% have invoices overdue by more than 30 days. Project businesses with milestone billing typically collect faster than time-and-materials businesses because milestones tie payment to completed work.
  • For agencies and consultants, BigTime, Bonsai, and FreshBooks dominate the SMB end. For contractors and construction, QuickBooks with progress invoicing, Buildertrend, and Knowify handle change orders better.
  • The choice depends on which model fits your work. Match the tool to the model, not the reverse.

Choose Your Billing Model First

Picking an invoicing tool before deciding your billing model is the wrong sequence. The model determines the tool, not the other way around.

Milestone billing ties payment to specific deliverables. The client pays X% upon project kickoff, Y% at design approval, Z% at launch. This works for projects with clear stages and deliverables. The risk: if a milestone slips, cash collection slips with it.

Retainer billing charges a recurring monthly fee for ongoing work, often with an hours included or a defined scope. The client pays predictably; you commit to availability. The risk: scope creep and underbilling when actual hours exceed the retainer.

Time-and-materials (T&M) billing charges hourly rates plus expense passthrough. The client pays for what you do. The risk: longer time to invoice (usually monthly in arrears), and clients sometimes resist hourly billing because it feels open-ended.

Progress billing charges based on percentage complete on a fixed-fee project. Common in construction and large software projects. If a project is 40% complete, the contractor invoices 40% of the contract value. The risk: disagreement on what "40% complete" means.

Change order billing handles scope additions outside the original contract. A signed change order increases the contract value; subsequent invoices reflect the new total. The risk: clients trying to slip scope additions through without signing the change order.

Most agency and consulting work uses a hybrid: milestones for the base project, T&M for support after launch, retainers for ongoing engagements, and change orders for scope additions. The tool you choose needs to support whichever mix you actually run.

For more on the differences between estimates and final invoices, see our estimate vs invoice best practices guide.

Tool Comparison by Billing Model Coverage

The table below scores each tool's depth on the five billing models. "Strong" means the model is supported as a first-class workflow. "Workable" means the tool supports the model with manual setup. "Weak" means you should pick a different tool for this model.

Tool Milestone Retainer T&M Progress Change Order Subscription
BigTime Strong Strong Strong Strong Workable ~$20/user/mo
Bonsai Strong Strong Strong Workable Workable $15/user/mo (Basic)
FreshBooks Premium Workable Strong Strong Weak Workable $65/mo
Harvest Workable Workable Strong Workable Weak $17.50/seat/mo
QuickBooks Online Plus Workable Workable Workable Strong (progress invoicing native) Workable $115/mo
Xero with Projects add-on Workable Workable Strong Workable Weak $50/mo + Projects
Buildertrend Strong (construction milestones) Weak Workable Strong Strong (construction native) ~$199/mo+
Knowify Strong Workable Strong Strong Strong ~$149/mo+
Billed Workable Strong (recurring invoices) Strong (with time tracking) Workable Workable Plan-based

The pattern: dedicated PSA (professional services automation) tools like BigTime and Bonsai handle the agency/consulting blend best. Construction-specific tools like Buildertrend and Knowify handle change orders and progress billing better than generic invoicing. QuickBooks Online Plus is the cheapest path to progress invoicing because it is native, but it falls short on time-tracking-to-invoice workflows.

Milestone Billing: When and How

Milestone billing works when your project has clear stages with defined deliverables. The client agrees upfront to a payment schedule tied to those stages.

A typical milestone schedule for a $40,000 brand identity project:

  • $10,000 (25%) at kickoff
  • $10,000 (25%) at moodboard approval
  • $10,000 (25%) at logo approval
  • $10,000 (25%) at final delivery

The benefit: cash flow follows project progress. You are not waiting until the end to invoice. The client commits to a payment cadence, which reduces the "we will pay you when the project is done" risk.

The watch-out: milestone slippage. If the moodboard approval takes three weeks longer than planned, your second payment slips three weeks too. The mitigation is to add "or by [date]" to the milestone trigger so payment is due either on milestone approval or on a calendar date, whichever comes first.

Tools that handle milestone billing well let you:

  • Create a project with a defined contract value
  • Define milestones with amounts and target dates
  • Generate an invoice when a milestone is marked complete
  • See progress against contract value in real time

BigTime, Bonsai, and Knowify do this cleanly. FreshBooks and Harvest support it with manual setup. QBO supports it via progress invoicing on the Plus tier but the UX is closer to construction-style percentage billing than milestone-by-deliverable.

We covered the workflow specifics in detail in our guide to milestone invoicing.

Retainer Billing: The Recurring Revenue Model

Retainer billing charges a predictable monthly fee, usually with a defined scope (hours included or services included). The client gets priority access; you get predictable cash flow.

A typical retainer structure:

  • $5,000/month for up to 20 hours of strategic work
  • Additional hours billed at $250/hour with prior approval
  • 3-month minimum commitment
  • 30-day notice to end

The benefit: cash flow stability. A 5-client retainer book generates predictable revenue without the constant "what is the next project" cycle.

The watch-out: scope creep. Clients who pay a retainer often expect more responsiveness than the scope defines. Tracking actual hours against the retainer cap is essential, and you need an invoicing tool that surfaces utilization clearly.

Tools that handle retainers well let you:

  • Set up recurring invoices that send automatically each month
  • Track hours against the retainer cap
  • Bill overage hours separately with prior approval flags
  • Show the client a utilization report at month-end

FreshBooks, Bonsai, and BigTime handle retainer + utilization tracking. Harvest tracks utilization well but the recurring invoice setup is lighter. QBO supports recurring invoices on Essentials and above but does not natively show retainer utilization.

For detailed retainer setup, see our guide to retainer invoicing.

Time-and-Materials: When Hourly Is the Right Answer

T&M billing charges hourly for time plus markup or passthrough on expenses. It is the right model when scope is genuinely unknown at project start (such as discovery engagements, troubleshooting, or open-ended consulting).

A typical T&M setup:

  • $250/hour for senior consultants, $150/hour for junior
  • 15% markup on third-party software and subscriptions
  • No markup on hard expenses like travel
  • Monthly invoicing on the 1st, due net-15

The benefit: you bill for what you do. Scope changes do not require contract renegotiation because there is no fixed scope.

The watch-out: client sticker shock. T&M invoices can feel open-ended. Sophisticated clients are comfortable with this; smaller clients sometimes are not. The mitigation is to set a not-to-exceed (NTE) cap and check in when you approach 80%.

Tools that handle T&M well integrate time tracking directly with invoicing:

  • Timer that runs against a project
  • Time entries automatically become invoice line items
  • Markup logic that applies to expense categories
  • NTE cap warnings before you blow through it

Harvest, BigTime, and Bonsai handle T&M well. FreshBooks Plus and above includes time tracking but the workflow is lighter. Zoho Invoice's free tier includes basic time tracking, which makes it the cheapest entry point for T&M billing.

For the operational details, see our guide to hourly invoicing.

Progress Billing: Percentage Complete

Progress billing is dominant in construction and large software projects where the contract has a fixed price but work happens over months or years. You invoice for the percentage of work completed in each period.

A typical progress billing setup on a $200,000 contract:

  • Month 1 (15% complete): invoice $30,000
  • Month 2 (30% complete): invoice $30,000 (the additional 15%)
  • Month 3 (50% complete): invoice $40,000
  • ...continued through 100%

The benefit: cash flow tracks work pace. You are not waiting for project completion to bill.

The watch-out: agreeing on what "30% complete" actually means. Construction has standardized formats (AIA G702/G703) for documenting percentage complete. Software does not. The most common dispute is whether the percentage reflects time spent, effort completed, or deliverables shipped.

Tools that handle progress billing well include:

  • A way to define the total contract value
  • A way to set percentage complete per billing period
  • Automatic calculation of the period's invoice amount
  • Running totals showing cumulative billed vs contract value

QuickBooks Online Plus and Advanced have native progress invoicing. Buildertrend and Knowify handle it construction-style with the AIA format. BigTime supports it with custom configuration.

We covered the workflow specifically in our guide to progress invoicing.

Change Orders: The Detail Most Tools Miss

Change order billing handles scope additions to a signed contract. A client requests additional work; you scope and price it; both parties sign; subsequent invoices reflect the higher contract value.

This is where most invoicing tools fall short. Generic invoicing tools treat a change order as just another line item. Construction-grade tools (Buildertrend, Knowify) treat change orders as first-class objects with their own approval workflow.

Why this matters: without a clear change order trail, disputes get expensive. A client argues "we did not ask for that"; you produce a signed change order with a date and dollar amount. Without the change order, you are arguing from notes.

What strong change order workflows include:

  • A change order form that captures scope, price, and impact on timeline
  • An approval mechanism (electronic signature or email confirmation)
  • Automatic increase of the contract value once approved
  • Visibility into change order history per project

Buildertrend, Knowify, and Procore handle change orders well. BigTime supports them with custom configuration. Generic invoicing tools mostly do not, which means you handle change orders outside the tool and add them to invoices manually.

Original Data: Cost Audit on a 12-Person Agency

We modeled tool cost for a 12-person digital agency: 6 designers, 4 developers, 2 account managers. Mix of milestone projects, three retainer clients, and occasional T&M support work.

Tool Annual Subscription Time Tracking Included? Billing Model Fit Notes
BigTime (12 users) ~$2,880 Yes, deep All 5 models Best fit for agency workflow
Bonsai (12 users, Pro) ~$2,664 Yes 4 models strong, change order workable Lighter touch than BigTime
FreshBooks Premium + 11 team members $780 + $1,452 = ~$2,232 Yes Retainer and T&M strong; progress weak Cheapest, but no progress billing
Harvest (12 seats) ~$2,520 Yes, best in class T&M strong; milestone workable Lacks deep retainer utilization
QuickBooks Online Plus + Time ~$1,380 + Time add-on Time add-on $20/user Progress native; T&M workable Cheaper subscription but worse PSA fit

Methodology note: pricing is current as of May 2026 from each vendor's pricing page. Tier choice assumes the closest match to typical agency feature needs. The "best fit" determination comes from agency-side discussions and our own testing on each platform.

The takeaway: for an agency running mixed billing models, BigTime and Bonsai are usually worth their cost over generic invoicing. For an agency that runs mostly retainers and T&M with simple invoicing, FreshBooks Premium can be the cheaper answer. For construction or contractor work with heavy change orders, Buildertrend or Knowify costs more but handles the specific workflow better.

The Four-Question Test To Pick Your Model

Before you choose a tool, run your engagements through this test. The model that answers "yes" to all four for at least 70% of your work is the model your tool needs to handle best.

Question 1: Is the scope clearly defined at project start? If yes, milestone or progress billing fits. If no, T&M fits.

Question 2: Does the client want predictable monthly costs? If yes, retainer fits. If no, milestone or T&M fits.

Question 3: Will the project span more than 60 days? If yes, milestone or progress billing fits. T&M with monthly invoicing also fits. Pure pay-on-completion does not work for cash flow reasons.

Question 4: Are scope changes common during the project? If yes, your tool needs strong change order workflows. If scope is locked, this matters less.

Most agencies and consultants run a hybrid. The tool needs to support the dominant model strongly and the secondary models at least workably.

When this guide isn't for you

This comparison is built for agencies, consultants, contractors, and project-based service businesses billing clients on milestone, retainer, T&M, progress, or change-order models. It is not the right framing if you run product-based or e-commerce work (different invoicing logic entirely; see our best invoicing software for e-commerce guide), if you bill flat fees with no project complexity (a simple invoicing tool covers the workflow), or if you run an enterprise-scale construction operation where ERP-grade billing (Sage Intacct, Procore for AR) is the right tier. In those cases, the project-billing-model framing here does not match your operational reality.

Frequently Asked Questions

What is the best invoicing software for project-based work?

For agencies and consultants running mixed billing models (milestone, retainer, T&M), BigTime and Bonsai are typically the strongest fits. For construction and contractor work with heavy change orders, Buildertrend and Knowify handle the specific workflows better. For solo consultants and small studios, FreshBooks Premium and Harvest cover most use cases at lower cost.

Can QuickBooks do project-based invoicing?

Yes, on the Plus tier ($115/month) and above. QuickBooks Online Plus includes project tracking and progress invoicing natively. It is strongest at construction-style progress billing and at tracking project profitability. It is weaker at milestone-by-deliverable workflows and at time-tracking-to-invoice automation compared to dedicated PSA tools.

What is milestone billing?

Milestone billing ties invoice amounts to specific deliverables in a project. The client agrees upfront to pay X% at kickoff, Y% at design approval, Z% at launch. Cash flow follows project progress rather than waiting until the end. The risk is milestone slippage; the mitigation is to add date triggers alongside deliverable triggers so payment is due either on milestone or by a calendar date.

How does progress billing work for service businesses?

Progress billing charges a percentage of the total contract value based on the percentage of work completed. On a $200,000 contract that is 30% complete, you invoice $60,000. The math is straightforward; the dispute risk is agreeing on what "30% complete" actually means. Construction uses standardized AIA forms (G702/G703); software services usually negotiate progress definitions in the contract.

What is a change order in invoicing?

A change order is a formal addition to the original project scope, with a defined dollar amount and timeline impact. Both parties sign the change order; subsequent invoices reflect the new total contract value. Without a signed change order trail, scope disputes become expensive arguments. Construction-grade tools (Buildertrend, Knowify) handle change orders as first-class objects; generic invoicing tools treat them as additional line items.

Can ChatGPT or AI generate an invoice for a project?

AI tools can draft an invoice template or calculate amounts, but they should not be the system of record. Invoicing requires an audit trail, payment links, tax accuracy, and reminder logic that AI chat tools do not provide. Use AI to write reminder copy or summarize project status; use a real invoicing tool for the invoice itself.

Authoritative Sources

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