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Pay Application Process (AIA G702/G703)

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: AR Team, Project Managers

Purpose​

Establish a consistent, timely process for preparing and submitting pay applications to maximize cash flow and minimize payment delays.

Overview​

The pay application (progress billing) process follows the AIA Document G702 and G703 format, which is the industry standard for commercial construction billing.

Key Documents:

  • G702 - Application and Certificate for Payment (cover sheet)
  • G703 - Continuation Sheet (Schedule of Values detail)

Monthly Billing Timeline​

DayActivityResponsible
1stBilling cycle opensAR
1st-10thField updates completion percentagesSuper/PM
10thBilling cut-off dateAll
10th-15thPM reviews and approves percentagesPM
15th-20thAR prepares pay app packageAR
20thPay application submittedAR/PM
20th-25thOwner/Architect reviewExternal
25thFollow up on approvalPM
30th/TermsPayment dueOwner

Note: Adjust timeline based on contract terms

Step-by-Step Process​

Step 1: Field Percentage Updates​

Who: Superintendent / Foreman
When: 1st-10th of month

  1. Review each line item on Schedule of Values
  2. Determine percentage complete as of billing date
  3. Document basis for percentage (linear feet, square feet, units, etc.)
  4. Note any stored materials to bill
  5. Submit completed worksheet to PM

Percentage Guidelines:

  • Use consistent methodology month-to-month
  • Be conservative (better to under-bill than over-bill)
  • Document measurement methodology
  • Consider work-in-place vs. materials only

Step 2: PM Review and Approval​

Who: Project Manager
When: 10th-15th of month

  1. Review field-reported percentages against:

    • Actual progress observed
    • Cost reports (cost vs. budget)
    • Schedule progress
    • Previous month's billing

  2. Verify change order status:

    • Only bill approved COs
    • Add approved COs to SOV

  3. Check for over/under billing:

    • Compare earned % to cost % (should be close)
    • Investigate significant variances

  4. Approve or adjust percentages

  5. Submit approved billing to AR

Step 3: AR Prepares Pay App Package​

Who: AR Department
When: 15th-20th of month

G703 Continuation Sheet (Schedule of Values)​

  1. Enter approved percentages in "Work Completed This Period" column

  2. Calculate:

    • Total completed to date (%)
    • Balance to finish
    • Retainage amounts

  3. Verify math carries correctly to G702

G702 Application Cover Sheet​

  1. Complete header information:

    • Application Number
    • Period To: (billing date)
    • Project Name and Number
    • Contract Date
    • Contractor information

  2. Calculate summary amounts:

    • Original Contract Sum
    • Net Change by Change Orders
    • Contract Sum to Date
    • Total Completed and Stored to Date
    • Retainage
    • Total Earned Less Retainage
    • Less Previous Certificates for Payment
    • CURRENT PAYMENT DUE

  3. Attach G703 Continuation Sheet

Step 4: Compile Supporting Documents​

Required with Every Pay App:

  • Signed AIA G702
  • AIA G703 Continuation Sheet
  • Conditional Lien Waiver (current billing period)
  • Unconditional Lien Waiver (previous period received)
  • List of approved change orders
  • Sub and supplier lien waivers (all tiers)

May Be Required (per contract):

  • Certified payroll (prevailing wage projects)
  • Daily reports for period
  • Progress photos
  • Updated schedule
  • Insurance certificates (if expired)
  • Stored material invoices

Step 5: Submit Pay Application​

Who: AR/PM
When: 20th or per contract terms

  1. Submit complete package to:

    • Owner (or Owner's Representative)
    • Architect (if required)
    • Construction Manager (if applicable)

  2. Obtain proof of receipt:

    • Email confirmation
    • Hand-delivery signature
    • Certified mail (if disputes)

  3. Log submission in tracking system:

    • Date submitted
    • Amount requested
    • Pay app number
    • Expected payment date

Step 6: Follow Up​

Who: PM / AR
When: Per contract payment terms

  1. Day 3-5: Confirm receipt and no initial questions
  2. Day 7: Check if approved or issues identified
  3. Day 14: Escalate if not approved
  4. Due Date: Verify payment received
  5. Due + 5 Days: Begin collections process if not received

Change Order Billing​

Adding Approved Change Orders to SOV​

  1. Only bill change orders after written approval
  2. Add as new line item(s) on G703
  3. Include:
    • CO number and description
    • Scheduled Value (approved amount)
    • Work completed this period (%)

Pending Change Orders​

  • Track separately
  • Do NOT include in pay application
  • Document in meeting minutes/correspondence
  • Escalate if approval delayed

Stored Materials​

Requirements to Bill Stored Materials​

  1. Materials must be:

    • Stored on-site or bonded warehouse
    • Properly protected from weather/damage
    • Clearly marked for this project
    • Covered by insurance

  2. Documentation required:

    • Invoice/proof of purchase
    • Photos of stored materials
    • Transfer bill (if off-site storage)

  3. Billing percentage:

    • Typically 100% of material cost
    • Subject to retention
    • Deduct from line item when installed

Retainage Management​

Standard Retainage​

  • 10% typical until 50% complete
  • 5% thereafter until final completion
  • 0% upon substantial completion (project dependent)

Tracking Retainage​

  • Track retainage by line item on G703
  • Total retainage shown on G702
  • Bill retainage release at closeout

Retainage Reduction​

  • Request reduction per contract terms
  • Document request in writing
  • Follow up monthly until released

Common Billing Problems and Solutions​

ProblemSolution
Pay app rejectedAddress issues immediately, resubmit ASAP
Missing lien waiversCollect before cut-off, have subs ready
Percentage disputesProvide documentation, photos, measurements
Payment delayedEscalate per contract, send notice
Change orders pendingBill only approved COs, track pending separately
Over-billed last monthCredit in current period, document reason

Pay Application Checklist​

Before submission, verify:

  • All line items updated
  • Math is correct (totals, percentages)
  • Change orders properly added
  • All required signatures obtained
  • Lien waivers collected (all tiers)
  • Supporting documents attached
  • Submitted by deadline
  • Proof of receipt obtained
  • Tracking system updated

Metrics to Track​

MetricTargetCalculate
Billing Timeliness100% on time% of pay apps submitted by deadline
First-Pass Approval95%% approved without revision
Days to PaymentPer contractDays from submission to payment
Billing Accuracy98%Amount billed vs. earned
  • AIA G702 Template
  • AIA G703 Template
  • Lien Waiver Management Procedure
  • Schedule of Values Setup Guide
  • Collections Procedure

Software Integration​

BLDR Pro Features:

  • Track line item percentages in real-time
  • Field updates from mobile devices
  • Photo documentation attached to line items
  • Automated percentage calculations
  • Export to accounting system

Template provided by support.construction. Customize with your company information.