Milestone payment Meaning
Milestone payment is simply a certain percentage of the project’s fee that the client pays throughout the project rather than paying 100% at the end. They are a series of payments, each of which is made upon the accomplishment of defined objectives. One rough example of a milestone payment system would be if a client paid you 20% upfront, 20% after the first draft is submitted, and 60% at project completion.
A particular project’s milestones are usually set by the client or employer and agreed upon the employee’s payment and milestones. Failure to achieve a milestone objective should result in a “why?” The why is part of a management decision: forego the payment and press on to the following purpose, redefine the milestone, terminate the project, or whatever other decision makes sense. The management decision might result in reimbursement of some incurred costs.
Milestone payments have many advantages for both the client and the employee; some of these advantages on the employee end include: the employee receives some payments if the project was dropped or discontinued making sure that hard work didn’t go unnoticed or uncompensated, also for the employee they help provide steady cash flow without waiting for the project completion which might take time, also it can help the employee to structure their current project into smaller segments and be more organized, and it can help protect the employee in case of a scam or a non-paying client without having done the majority of the work for nothing.
It is also advantageous for the client or employer to follow a milestone payment model for several reasons: a milestone payment model usually attracts more professionals. Hard-working employees so can help the client find skilled talent for their project. It can take the client’s financial load by paying smaller amounts periodically instead of paying the whole amount as a one-time payment, making a more considerable dent in the client’s budget. It can help the client figure out if the employee is doing something wrong early on or not offering the expected quality, which allows the client to either modify or terminate the contract before it’s too late.
Well-structured, payable milestones can serve the dual purpose of meeting the performer’s cash flow needs and as a management tool to verify achievements on the critical path to project success. Failure to achieve milestone/technical goals forces a management analysis and decision.