Progress payment is a common practice in contract costing, where payments are dispersed to a contractor as work is completed. This payment system is aimed at a fair payment scheme where the contractor is paid for the work they have done. Progress payment is an essential element in contract costing and is vital to ensure timely and fair payments.

The significance of progress payment in contract costing cannot be overstated. Firstly, progress payment allows a contractor to receive payments for the work they have completed, thereby reducing the risk of non-payment. This system ensures that the contractor is paid a portion of the contract amount as they complete each stage of the job, making it easier for them to maintain their cash flow.

Additionally, progress payment incentivizes the contractor to complete the work on time and as per the contract specifications. With a payment schedule in place, they are encouraged to work efficiently and complete the project within the agreed timeline. This payment system also motivates the contractor to maintain quality standards and meet the project`s specifications since they will only receive payments when they have done so.

Progress payment also benefits the client as it provides them with an opportunity to monitor the progress of the project and make payments accordingly. By making payments only for completed work, the client can ensure that the contractor is meeting their expectations and that the project is progressing as planned. This approach to payment also helps the client to manage their cash flow better and avoid over-committing their resources.

In conclusion, progress payment is an essential aspect of contract costing that benefits both the contractor and the client. By providing a fair payment system, it motivates the contractor to work efficiently, maintain quality standards, and complete the project on time. The client, on the other hand, benefits from better project management and cash flow. Therefore, progress payment should be an integral part of any contract costing project.