A progress draw (or progress billing) is a partial payment invoiced as a job reaches an agreed stage, instead of one bill at the end. Draw schedules are set in the contract and tied to milestones (rough-in complete, drywall closed, substantial performance) or to a percentage of completion. Each draw is a real invoice: in Ontario it must meet the proper-invoice requirements to start the 28-day payment clock, statutory holdback applies to each draw in provinces that require it, and the GST/HST on each draw becomes collectible when that draw is invoiced. Progress draws are standard on renovations and builds that run longer than a few weeks, because they keep the contractor from financing the whole job out of pocket.
Why it matters to Canadian contractors
- Cash flow is the number one killer of small contracting businesses. A draw schedule means materials and labour for stage two are funded by stage one, not by your line of credit.
- In Ontario, BC, and Alberta the payer must hold back 10% of each draw (on the pre-tax amount) until lien rights expire. If you bill $40,000 across four draws, $4,000 of it arrives only at holdback release, and your cash-flow plan needs to know that.
- Each draw invoice stands on its own under prompt-payment rules: its own proper-invoice fields, its own 28-day clock, and its own notice-of-non-payment window if the payer disputes part of it.
- A written draw schedule in the contract is also a dispute-prevention tool: the client agrees in advance what done looks like at each stage and what it costs.
Common mistakes and pitfalls
- Front-loading draws beyond the value of completed work invites disputes and, on certified jobs, will not survive a payment certifier's review.
- Holdback is calculated per draw on the pre-tax amount. Withholding 10% of the tax-included total over-withholds.
- GST/HST on a draw is collectible when the draw is invoiced, not when the client pays. The tax belongs to the filing period of the invoice date.
- Verbal stage agreements are unenforceable in practice. The draw schedule, amounts, and completion definitions belong in the signed contract, and each change order should adjust them in writing.
Related
- Glossary: Statutory holdback→
- Glossary: Proper invoice→
- Glossary: Substantial performance→
- Deposits for Ontario contractors→
- Ontario Construction Act guide→
This glossary entry is for general information only and does not constitute legal or tax advice. Canadian tax and construction law rules vary by province and contract. For advice specific to your situation, consult a licensed professional.