Milestone Billing
Milestone billing is a billing approach in which the customer is invoiced in installments when defined project milestones are reached or on agreed dates.
Billing
Explanation
Milestone billing is common for:
• custom-built machinery and production systems,
• implementation and integration projects,
• construction and engineering contracts,
• large equipment installations.
Typical milestones include contract signing, design approval, delivery, installation, and final acceptance. In SAP SD, milestone billing is set up with billing plans, and milestones can be linked to project progress.
Why It Matters
Milestones are commercial payment events. They do not automatically reflect when control transfers to the customer. Under ASC 606 and IFRS 15, revenue may be recognized over time based on progress, or at a point in time, regardless of the billing schedule. The difference results in contract assets (revenue ahead of billing) or contract liabilities (billing ahead of revenue), which must be tracked and reconciled.
Related Terms
Billing Plan · Contract Asset · Contract Liability · Down Payment · Unbilled Revenue
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