Definition
A milestone payment is a payment that becomes due when a defined stage of a project is completed, such as design approval, a prototype delivery, or launch. Milestone payments split a large project into predictable instalments tied to progress rather than to calendar dates.
Milestone payment in practice
Milestones should be objectively verifiable so there is no dispute about when payment is due. Each milestone is billed with its own progress invoice that references the overall contract.
Frequently Asked Questions
How many milestones should a project have?
Three to five is typical. Fewer than three concentrates risk; more than five creates administrative overhead. Align milestones with natural approval points in the project.