Payment terms are equally important for buyers as well as service providers. Payments are a big concern for buyers. Often, they pay upfront for project delivery only to be surprised that the final deliverables do not meet their expectations and that the payments they made have gone waste. Milestone-based escrow payments provide an excellent mechanism to link payment schedule to quality and schedule. It’s also important for service providers to get some steady working capital while they work hard to complete an assignment. The best way they can safeguard their interests is by setting up their own milestones for escrow payment.
What are Milestones?
Milestones serve as signals that mark the completion of different stages of a project. They not only signify the ‘distance traveled’ (key steps in project) but also reflect ‘direction of travel’. Payments along with a set of deliverables are fixed corresponding to each stage of the project.
Milestone-based payments…as risk mitigation tools
Milestones are important steps in the project life cycle that outline a delivery schedule and corresponding payments for progressive stages of the project. These are generally set for big projects and also for ones, which need constant supervision at every step.
At the time of bidding, the provider can break the large project into smaller chunks and draft a project contract specifying the milestones. Project Contract is a mutual agreement between buyer and service provider on scope, deliverables, payment and schedule of a project. It allows both the parties to agree in advance how the project will progress from stage to stage or milestone to milestone.
This is indeed a great way for both the buyer and service provider to ensure that the project is on track and progressing as scheduled. It minimizes risks related to outsourcing and helps justify payments besides reducing risks through visible progress. 
For example, if there is web development project and both the service provider and buyer have mutually agreed on the below listed milestones through a project contract, then the payments would be released by the buyer to the provider after successful completion of each milestone.
Milestones: (a) Approval of Design (b) Preparation of Prototype (c) Development of Complete Solution (d) Testing (e) Go Live
Milestone-based payments on LimeExchange
Project execution starts on LimeExchange after both the parties, buyers & service providers, have mutually agreed on scope, deliverables, payment and schedule of a project. However if there is any kind of disagreement, the buyer can add, modify or delete the milestones as per his wishes and then send it to the provider for his consent.
Once the provider approves of the same, the project execution receives a green signal. As soon as the the buyer escrows the first milestone payment to LimeExchange, the provider starts working on the project.
Release of payments as per the milestone status
On LimeExchange, the Payment Status column in the milestone details shows the status for each milestone in the business agreement. Following are three phases of milestone payment schedule:
1. Escrow Pending – The buyer has not escrowed the payment. Work cannot be started on any milestone until the payment for that milestone has been placed in escrow.
2. Escrow Deposited – This means that the buyer has escrowed the payment and the milestone is in progress.
3. Escrow Released – This means that milestone deliverables have been accepted by the buyer and payment has been released to the service provider.
Milestones which have been completed cannot be modified. Once payment has been escrowed for a milestone, only the delivery time can be extended. Milestones which have not been escrowed can be modified by making changes to delivery dates, milestone amount or attachment.
Be in control of your payment schedule!
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