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💰 Pay Application Guide

Pay applications are how you get paid. Master the process to improve cash flow and avoid disputes.

Cash Flow is King

Submit on time, every time. A late pay app means you wait another 30+ days to get paid.

Understanding Pay Applications​

A pay application (or "pay app") is your formal request for payment based on work completed. Most commercial projects use AIA G702/G703 forms.

Key Documents​

DocumentPurpose
AIA G702Application and Certificate for Payment (summary)
AIA G703Continuation Sheet (schedule of values detail)
Lien WaiversRequired releases for payment
Supporting DocsBackup for stored materials, change orders, etc.

The Pay Application Process​

1. Set Up Schedule of Values (SOV)​

Before your first pay app, establish your SOV:

  • Break down contract into logical line items
  • Front-load moderately (but don't be obvious)
  • Include mobilization, general conditions, closeout
  • Get owner/architect approval before first billing

SOV Tips:

  • 15-30 line items for most projects
  • Match specification divisions where possible
  • Include stored materials line if needed
  • Build in room for change orders

2. Monthly Progress Assessment​

Around the 25th of each month:

  1. Walk the project with your team
  2. Assess percent complete by line item
  3. Document with photos
  4. Calculate earned value

3. Prepare the Application​

AIA G702 includes:

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

AIA G703 shows:

  • Each SOV line item
  • Previous billings
  • Current period work
  • Stored materials
  • Balance to finish

4. Gather Required Documents​

Most contracts require:

  • ✅ Signed pay application
  • ✅ Conditional lien waiver (current)
  • ✅ Unconditional lien waiver (previous)
  • ✅ Sub conditional waivers
  • ✅ Certified payroll (if prevailing wage)
  • ✅ Insurance certificates (if expiring)
  • ✅ Stored material documentation

5. Submit on Time​

Critical: Know your contract's billing deadline. Miss it by a day and you wait another month.

Common deadlines:

  • 25th of the month
  • Last day of the month
  • 5 days before owner's pay app due

6. Follow Up​

Track your pay app through:

  • Architect review (7-10 days)
  • Owner approval (7-10 days)
  • Payment processing (15-30 days)

If payment is late: Send written notice per contract terms.

Common Pay App Mistakes​

Overbilling​

Billing more than you've completed:

  • ❌ Damages trust with owner/architect
  • ❌ Creates problems at closeout
  • ❌ Can be considered fraud

Underbilling​

Billing less than you've completed:

  • ❌ Hurts your cash flow
  • ❌ Increases risk if project goes bad
  • ❌ Makes it hard to catch up later

Missing the Deadline​

  • ❌ Wait 30+ more days for payment
  • ❌ Cash flow crisis
  • ❌ Hard to explain to your bank

Incomplete Packages​

Missing lien waivers or backup:

  • ❌ Pay app rejected, resubmit
  • ❌ Delays payment cycle
  • ❌ Makes you look disorganized

Retention​

Most contracts hold 5-10% retention:

  • Standard: 10% until 50% complete, then 5%
  • Reduced: Some contracts allow 5% from start
  • Release: Typically at substantial completion

Getting Retention Released​

  1. Achieve substantial completion
  2. Complete punch list
  3. Submit all closeout documents
  4. Request retention release in writing
  5. Provide final lien waivers

Stored Materials​

Billing for materials stored off-site:

Requirements:

  • Material is fabricated or non-returnable
  • Stored in bonded warehouse or secured area
  • Proof of ownership (invoices)
  • Insurance certificate covering storage
  • Some contracts prohibit off-site storage billing

Disputed Amounts​

If the owner disputes a line item:

  1. Don't hold up the whole pay app — Bill undisputed amounts
  2. Document your position — Respond in writing
  3. Continue working — Unless contract allows suspension
  4. Escalate if needed — Per dispute resolution clause

Progress Tracking Tips​

Percent Complete Methods​

MethodBest For
Units installedRepetitive work (doors, fixtures)
Linear feetPipe, conduit, ductwork
Square feetDrywall, flooring, roofing
Earned hoursLabor-heavy work
MilestoneLong-lead items

Weekly Tracking​

Don't wait until billing time:

  • Track progress weekly
  • Update quantities in real-time
  • Take progress photos
  • Note any delays or issues

Tools & Resources​

Free Template: Download our schedule of values template and pay app checklist.

Go Digital: BLDR Pro tracks progress by cost code, generates SOV reports, and helps you never miss a billing deadline.