Milestone payments are an alternative to time and material billings and are typically favored by customers and clients. However, milestone payments can also be favorable to the interests of the vendor if properly structured.

The primary first challenge in accepting a milestone payment framework as a vendor is to define the milestones with objective particularity. Milestones are usually triggered by deliverable submissions. Be sure the deliverable meets objective criteria and is sufficiently tangible for validation.

A second challenge is to eliminate customer discretion in invalidating the deliverable by arbitrarily withholding approval. The best approach is a structured approval process requiring the customer to document the reasons for withholding approval. This avoids payment delays under the milestone schedule related to the customer approval process.