Why progress billing changes everything in accounting
On Swiss construction sites, the client rarely pays the full amount when work is finished. Contracts based on SIA standards provide for down payments, progress certificates, and final balances tied to technical and administrative milestones. For a construction SME or tradesperson with several open sites, billing is not just administration: it drives cash flow, margin per job, and consistency between the balance sheet and operational reality.
In Switzerland, the contract for work is governed by the Code of Obligations (in particular Arts. 363 et seq. and 370 et seq. CO on acceptance and warranty) and supplemented by SIA general conditions, especially SIA 118 for building construction contracts. Contract clauses define when the receivable has matured, which documents are required (progress certificate, certificates, partial acceptance), and whether retention amounts apply. Accounting must reflect these steps; otherwise you risk overstating revenue, understating payables to suppliers, or recording VAT in the wrong period.
This guide explains, with reference to 2026 practice, how to structure down payments and progress invoices, handle retention, recognize revenue under Swiss accounting rules, and maintain traceability by job — useful both to the owner and to the trustee using Accountex for management control.
SIA framework and payment cycle on site
Before opening the VAT register or the income statement, it helps to map the flow set out in the contract. In Swiss construction practice, three elements converge:
Contract and bill of quantities: offer, any discount, variations and supplements (change log). The bill of quantities or quote structured by line items becomes the basis for measuring percentage progress or progress by section.
Progress certificate (PC): periodic document — often monthly — that quantifies work performed, materials incorporated, and third-party services, net of parts not yet completed. The client or site manager verifies and certifies the billable amount.
Invoice and collection: based on the certified PC, an invoice is issued (with retention if applicable). Due dates and default interest follow the contract and CO; if defects are disputed, suspension of payment generally requires a formal request for remedy (Art. 82 CO and SIA 118 practice), unless otherwise agreed.
Down payment (advance)
Amount paid before or at the start of work, linked to guarantees (security deposit, surety bond). In accounting it is not revenue: it is an advance from the client until the corresponding performance is delivered.
Progress billing
Periodic invoicing proportional to work certified in the PC. It is the core of site liquidity and revenue recognition over time.
Final balance and retention
Final invoice after acceptance or handover, with recovery of retention withheld on earlier progress certificates where applicable.
Down payments, progress billing, and final balance: what changes in the financial statements
Confusing an advance with revenue is one of the costliest mistakes for construction SMEs. The table summarizes typical accounting effects (executing contractor, ordinary bookkeeping):
| Document type | Legal timing | Revenue (income statement) | Typical balance |
|---|---|---|---|
| Down payment invoice | Advance collection on the contract | No revenue until the corresponding performance is delivered | Liability: advances received / work in progress |
| Progress invoice (certified PC) | Partial performance delivered and accepted under the contract | Revenue proportional to degree of completion (POC method) | Receivables vs. clients; costs on jobs in progress |
| Retention (withheld) | Security until acceptance / end of period | Revenue for the period if invoiced gross; withheld portion remains a receivable | Receivables (unpaid portion) or separate line item to monitor |
| Final invoice | Completion and acceptance (subject to reservations) | Revenue true-up and recovery of retention | Close job account; possible post-acceptance warranties (e.g. SIA 118 Art. 181 et seq.) |
| Variations not yet approved | Work in progress without written order | As a rule, no additional revenue until approval | Possible capitalization as work in progress / risks |
Revenue recognition in Swiss accounting
For jobs spanning more than one fiscal year, entities applying Swiss GAAP FER 22 (or Swiss GAAP RPC 22 for companies subject to ordinary audit) allocate revenue and costs over time using the percentage-of-completion method (POC) when the cumulative conditions set out in the standard are met. SMEs subject only to the CO (Art. 957 et seq.) must also respect principles of accrual accounting and prudence; POC is correct practice when the contract, progress, and margins can be determined reliably.
Percentage-of-completion method (POC)
Estimate the percentage complete (costs incurred, hours, PC line items, or a documented mix). Period revenue equals contract consideration earned based on degree of completion, net of revenue already recognized and advances still to be cleared; direct costs (materials, hire, subcontractors, site labor) flow into the job cost account.
Always aligning book revenue with the base certified by the client avoids audit variances and disputes over margins.
Unbilled revenue and work in progress
If work is performed but the PC is not yet certified, you may recognize unbilled revenue (receivables) and, symmetrically, accrued costs for suppliers. The estimate must be prudent and consistent with the contract — unapproved variations must not be capitalized as revenue.
At year-end, every significant job deserves a summary: initial budget, cumulative PC, invoiced amounts, advances, retention, and costs allocated.
For very small companies with short jobs within a single fiscal year, billing and recognition may coincide; as soon as duration exceeds a few months or contract value becomes material relative to turnover, applying POC (or, if prerequisites are missing, the completed-contract method under FER 22) helps avoid distortions in margin and liquidity.
Retention amounts: cash flow and bookkeeping
Retention (withheld on progress invoices) protects the client against defects or incomplete work. With reference to SIA 118 (Art. 150), unless otherwise agreed, the rule is generally 10% of the value of the performance (5% if the value exceeds CHF 500,000, with a minimum of CHF 50,000), up to a maximum of CHF 2,000,000. Legally it is part of the price, but payment is deferred. In accounting it is advisable to track it explicitly: gross invoice, net collection, receivable from the client for the withheld portion.
On acceptance or expiry of the contractual warranty (distinct from the five-year limitation period for defect claims on immovable works, Art. 371 para. 2 CO, and the ten-year term applicable only in cases of fraudulent concealment of defects), retention is invoiced or paid with a settlement document. Do not confuse it with a security deposit paid by the client: retention arises from the contract for work, not from a separate deposit.
| Phase | Administrative action | Accounting note |
|---|---|---|
| Issue PC invoice | Show gross amount, retention %, and net payable | Revenue and VAT on invoiced (gross) amount; receivable for uncollected portion |
| Retention follow-up | Verify acceptance and contractual expiry | Collection or supplementary invoice per practice agreed with the trustee |
| Dispute | Document client reservations | Assess impairment of receivables; do not reverse revenue already earned without legal analysis |
VAT on progress invoices
For the applicable rate, what matters is when the service is performed on site (Art. 115 para. 1 VAT Act; FTA practice on progress situations), not the payment date. For taxable construction services in Switzerland, the standard rate generally applies (8.1% from 1 January 2024), except for special cases provided by law.
The tax point for output tax follows Art. 40 VAT Act: with accounting “according to agreed consideration,” generally at invoicing (including advances and partial certificates); advances for services not yet performed may trigger tax on collection if not invoiced. Every progress invoice documenting work already performed must align with the service period. A VAT register per job — or at least per contract — reduces errors when filing periodic returns.
Subcontracting and purchase invoices should be allocated to the job with the same accrual logic: input VAT is deductible when the supplier invoice is valid and the service is for the job, regardless of when the client pays the main contractor.
Recommended operational workflow for construction SMEs
A repeatable process avoids duplicate invoicing and liquidity gaps between month-end on site and accounting close:
- Open a project or cost center per job, with budget by line item and target margin.
- Record contract, advances, and guarantees (surety bond) in documents linked to the project.
- At period end: prepare internal PC, compare with client certification, record variances.
- Issue progress invoice with retention, record VAT and receivable; collect and reconcile with bank statement.
- Allocate costs (hire, materials, subcontractors, hours) to the job; update degree of completion and margin forecast.
- At year-end: for multi-year jobs, align POC revenue, remaining advances, and outstanding retention.
- On acceptance: final invoice, release of retention, close project, and archive PC and approved variations.
Liquidity and payroll costs
Site wages and social contributions (AHV, pension fund, allowances) continue to fall due regardless of PC certification timing. Planning cash needs including unpaid retention and advances to pay suppliers avoids overdrafts even when the balance sheet shows a theoretical positive margin.
Controls, common errors, and audit
Trustee / owner checklist
- Certified PC ≤ cumulative invoiced + cleared advances
- Retention by client with expiry and acceptance status
- Variations with written order before additional revenue
- VAT consistent between issued invoices and return
- Margins per job explainable vs. initial budget
Errors to avoid
- Booking advances as immediate revenue
- Omitting unbilled revenue at year-end on work performed
- Treating retention as a trade discount
- Mixing overhead and job costs without allocation
- Invoicing progress without signed or traceable PC backup
SMEs that opt out of audit remain subject to bookkeeping and truthfulness obligations; poorly documented jobs complicate tax audits and contract succession. Centralizing contracts, PCs, and invoices in one system — as intended in Accountex workflows — reduces operational risk and speeds dialogue with the bank and trustee.
In summary
Progress billing under SIA logic links site practice and Swiss accounting obligations: down payments, certified certificates, retention, and revenue recognition over time should be managed as a single process. With discipline on project tracking, VAT, and year-end close, the construction SME turns SIA documents into reliable figures for decisions on pricing, staffing, and investment — without waiting for the job’s final balance.