AIA Billing for Construction

What Is AIA Billing?

AIA billing refers to the standardized progress billing format created by the American Institute of Architects. It's the most widely accepted invoicing method in commercial construction, used by GCs, subcontractors, and project owners to track and approve payments on long-term projects.

The two core documents are the AIA G702 (Application and Certificate for Payment) and the AIA G703 (Continuation Sheet), which together break down the contract into line items and track billing progress.

G702 & G703 Explained

G702 is the cover sheet that summarizes:

• Original contract sum and approved change orders
• Total completed and stored to date
• Retainage held
• Current payment due

G703 is the line-item breakdown that lists:

• Each scheduled value (division of work)
• Previous applications and current period billing
• Materials presently stored
• Percentage complete per line item

Schedule of Values

The Schedule of Values (SOV) is the foundation of AIA billing. It's created at the start of a project and breaks the total contract amount into categories of work. Each pay application draws against this schedule.

A well-structured SOV is critical. If line items are too broad, it's hard to demonstrate progress. If they're too granular, the billing process becomes unmanageable. Most experienced contractors front-load their SOV slightly to improve early cash flow—while staying within ethical and contractual bounds.

Retention & Retainage

Retainage (typically 5–10%) is the portion of each payment withheld by the project owner until the project is substantially complete. It's designed to ensure the contractor finishes the work, but it can create serious cash flow strain—especially on long projects.

Tracking retainage accurately in your books is essential. It should appear as an asset (retainage receivable) on your balance sheet, not just deducted from revenue.

Common AIA Billing Issues

• Mismatched SOV and actual costs: If your schedule of values doesn't align with your job cost structure, reconciliation becomes a nightmare.
• Late submissions: Missing the billing window by even a day can push your payment out by 30–60 days.
• Unsigned change orders: Billing for unapproved change orders is the fastest way to get your pay app rejected.
• Incorrect retainage calculations: Errors in retainage tracking compound over the life of a project.

Best Practices

1. Build your SOV to mirror your job cost structure in QuickBooks or Sage.
2. Submit pay applications on the same day every month—treat it like a deadline.
3. Track retainage as a separate line item in your accounting system.
4. Keep signed change orders organized and cross-referenced to your SOV.
5. Review each pay app with your bookkeeper before submission to catch errors early.

At Scaffold, we manage the entire AIA billing process for our clients—from structuring the schedule of values to preparing pay applications and tracking retainage. We make sure your billing is accurate, on time, and aligned with your job costs so you get paid faster and avoid rejected pay apps.