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AIA Billing Explained: A Contractor's Guide to G702 and G703

Scaffold Bookkeeping• 6 min read•February 18, 2026

Quick Answer

Streamline your construction invoicing with our comprehensive guide to AIA G702 and G703 forms. Learn how to manage progress billings, schedule of values, and retainage while staying compliant with federal and Washington State regulations.

Quick Answer: AIA Billing Explained: A Contractor's Guide to G702 and G703

Quick Answer: AIA billing is a standardized method of progress payment application developed by the American Institute of Architects. It consists of two primary documents: the G702 Application and Certificate for Payment (a summary cover sheet) and the G703 Continuation Sheet (a detailed schedule of values). This system ensures transparency between contractors, architects, and owners, facilitating timely payments under laws like the Prompt Payment Act.

The Importance of Standardized Progress Billing

In the construction industry, cash flow is managed through progress billing rather than simple lump-sum invoicing. This method allows contractors to bill for work completed during a specific period. The American Institute of Architects (AIA) established the G702 and G703 forms to create a uniform language for these requests across the United States. Utilizing these forms ensures that all parties—contractor, owner, and architect—are looking at the same financial data, which is essential for meeting financial reporting standards such as the Percentage of Completion Method (PCM) required for certain long-term contracts (Source: Washington State L&I - Contractor Registration).

Understanding the AIA G702: Application and Certificate for Payment

The G702 serves as the summary page of the billing application. It acts as both a formal request for payment by the contractor and a certification by the architect that the work has progressed to the point indicated. The document requires specific calculations to ensure accuracy in funds disbursement.

Key Components of the G702

The G702 tracks the contract sum and adjustments made through change orders. It includes the following vital data points:

Original Contract Sum: The initial price agreed upon at the start of the project.

Net Change by Change Orders: The sum of all approved changes to the scope of work (Source: AIA Document G701™–2017, Change Order).

Total Completed and Stored to Date: The cumulative value of work finished plus materials currently stored on-site.

Retainage: A portion of the payment withheld to ensure project completion. In Washington State, for public works, this is often limited to 5% (Source: RCW 60.28.011, Retained Percentage).

Understanding the AIA G703: Continuation Sheet

While the G702 provides the summary, the G703 provides the detail. This is known as the Schedule of Values (SOV). The SOV breaks down the entire contract amount into various portions of the work, such as site prep, framing, and electrical. This breakdown is critical for the architect to verify that the billing is commensurate with the actual physical progress on-site.

Under Generally Accepted Accounting Principles (GAAP), specifically ASC 606, Revenue from Contracts with Customers, the ability to recognize revenue is tied to the transfer of control of goods or services. The G703 acts as the primary tool for documenting this transfer for progress payment purposes (Source: FASB ASC 606, Revenue from Contracts with Customers).

Retainage: Rules and Compliance

Retainage is a critical component of AIA billing. It acts as a security for the owner. However, contractors must be aware of state-specific statutes governing how much can be withheld. In Washington, the law stipulates that on public works contracts, the public body must withhold a sum not to exceed 5% of the estimates of the work completed (Source: RCW 60.28.011, Washington State Retainage Law).

For private projects, the retention percentage is usually governed by the contract terms, but excessive retention can lead to cash flow issues. On federal projects, the Federal Acquisition Regulation (FAR) provides guidelines on when and how much retainage should be applied (Source: 48 CFR §52.232-5, Payments under Fixed-Price Construction Contracts).

The Role of Stored Materials

AIA billing allows contractors to bill for materials that have been purchased and stored but not yet installed. This is reflected in Column F of the G703 form. For a contractor to be paid for stored materials, they must typically provide evidence of insurance and proof that the materials are stored in a secure, bonded location. This ensures the owner's interest is protected under the Uniform Commercial Code (UCC) (Source: RCW 62A.9A-301, Washington UCC - Law Governing Perfection and Priority of Security Interests).

Certification and the False Claims Act

When a contractor signs the AIA G702, they are swearing that the work described is complete and that all subcontractors and suppliers have been paid for work covered by previous payments. On federal projects, submitting a false AIA application for payment can trigger the False Claims Act. Penalties for knowingly submitting a false or fraudulent claim for payment from the government can be severe (Source: 31 USC §3729, False Claims Act).

Washington State Prompt Payment Acts

One of the benefits of using standardized AIA billing is that it creates a clear timeline for payment. In Washington, the Prompt Payment Act for public works requires that payment be made within 30 days of receipt of a proper invoice (Source: RCW 39.76.011, Washington Public Works Prompt Payment). For private projects, unless otherwise agreed, the contractor must pay subcontractors within 10 days of receiving payment from the owner (Source: RCW 39.04.250, Payments to Subcontractors and Suppliers).

Tax Implications: Sales Tax and the G703

In Washington State, construction services are subject to Retail Sales Tax unless specifically exempt. Contractors must ensure that the totals on the G702/G703 accurately reflect whether tax is included or excluded based on the contract type (Lump Sum vs. Time and Materials). The Washington Department of Revenue provides specific guidance on how sales tax applies to different types of construction (Source: WAC 458-20-170, Constructing and Repairing of New Buildings and Structures).

Common Errors in AIA Billing

Mathematical Inconsistencies: The G702 and G703 must match exactly. If the G703 total does not equal the G702 summary, the architect is likely to reject the application, delaying payment.

Unauthorized Change Orders: Contractors often bill for change orders before they are formally executed. According to general AIA contract terms, a change order must be signed by the owner and architect to be included in the G702 total (Source: AIA Document A201™–2017, General Conditions of the Contract for Construction).

Incorrect Retention Calculations: Applying the wrong percentage of retention to specific line items on the G703 can lead to cumulative errors over the life of the project.

Conclusion

The AIA G702 and G703 forms are more than just paperwork; they are the financial backbone of a construction project. By adhering to these standards, contractors ensure compliance with federal prompt payment laws, state retainage statutes, and GAAP revenue recognition standards. For Washington contractors, understanding the intersection of these forms with RCW requirements is essential for maintaining a healthy bottom line and avoiding legal disputes.

Sources

RCW 60.28.011, Retained Percentage - Washington State Legislature

RCW 39.76.011, Interest on unpaid public contracts - Washington State Legislature

RCW 39.04.250, Payments to subcontractors - Washington State Legislature

WAC 458-20-170, Constructing and repairing of new buildings or other structures - Washington Administrative Code

26 USC §460, Special rules for long-term contracts - Internal Revenue Code

31 USC §3729, False Claims Act - United States Code

48 CFR §52.232-5, Payments under Fixed-Price Construction Contracts - Federal Acquisition Regulation

FASB ASC 606, Revenue from Contracts with Customers - Financial Accounting Standards Board

AIA Document A201™–2017, General Conditions of the Contract for Construction - American Institute of Architects

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Frequently Asked Questions

What is the maximum retainage allowed in Washington State for public projects?

For public works projects in Washington, the amount of retainage withheld from progress payments cannot exceed 5% of the total estimate for work completed (Source: RCW 60.28.011, Retained Percentage).

When must a subcontractor be paid after the general contractor receives payment in Washington?

In Washington, general contractors must pay their subcontractors for satisfactory performance within 10 days of receiving payment from the owner or public body (Source: RCW 39.04.250, Payments to subcontractors and suppliers).

Is interest required on late payments for public works in Washington?

Yes, public bodies that fail to make timely payments on a proper invoice within 30 days are generally liable for interest at the rate of 1% per month (Source: RCW 39.76.011, Interest on unpaid public contracts).

What is AIA Billing Explained?

AIA Billing Explained is a critical financial process in construction that helps contractors track costs, ensure compliance, and maintain profitability across projects. It requires specialized knowledge of construction accounting principles and regulatory requirements.

Why is AIA Billing Explained important for construction companies?

AIA Billing Explained ensures accurate financial reporting, regulatory compliance with IRS and state requirements, and provides the data needed for informed business decisions. Without proper management, contractors risk financial penalties and lost profitability.

AIA BillingG702G703Construction AccountingWashington State ComplianceRetainage