A Contractors Guide to AIA Billing

You can do this by going to the invoices tab of the project and select release retainage. From a projects perspective you can get 1 AIA, it’s on the AR side where several invoices are created. Bookkeeping for Chiropractors If faster billing workflows and shorter payment cycles would make a difference for you, request a demo of Siteline today. View your projects’ billing health from every angle in real time. Our platform also integrates seamlessly with your ERP system, syncing accounting and project management data automatically.

• It forces regular communication on the progress of a job, and requires you to have a good understanding of what might be going wrong.
• We are a subcontractor working at a project and received the waiver of release of liens(MLA appointment).
• As a contractor, all change orders need to be approved by the GC, owner, or architect.
• “Contract for” asks for a brief description of the labor or materials you are providing, along with the date the contract was signed and the project number (if there is one).
• Paying from the retainage to subcontractors and suppliers helps the owner complete the work.
• You’ll need to keep track of the amounts you originally applied for, what you actually billed, and what you got paid for.

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Clients calculate retainage at a certain percentage of every payment made throughout the entire project. At times, clients may withhold it at once to pay after completing the project. However, some clients may prefer to deduct the fixed percentage from every payment made to the contractor. Therefore, the retainage payable or retainage fee can range between 5-10% of the total project cost submitted by the contractor and accepted by the client. This article will tell you everything you need to know about including retainage on your next construction payment application.

So, What Is AIA Billing?

AIA billing, with its standardized G702 and G703 forms, is integral to the construction industry’s financial operations. Overbilling occurs when a contractor bills for contracted labor and materials prior to that work actually being completed. The purpose of G703 is to allow GCs to keep a close eye on your billing. As that is their purpose, they will probably ask you to break your payment request into several line items. Sometimes this form is simply referred to as “AIA Payment retainage in construction Application Form G703”.

• The G702 or similar payment application can be used whenever a contractor applies progress payments to an owner or when certified by an architect.
• In AIA billing, you can bill for materials you’ve purchased for the job even if they haven’t been used yet.
• Our connected global construction platform unites all stakeholders on a project with unlimited access to support and a business model designed for the construction industry.
• Punch list work might seem minor, but it has an improportionate impact on payment.
• While the G702 and G703 are very popular, there are other forms that we will need to support at some point.

Understanding Construction Retainage: Purpose, Release Options, and Efficient Management with Cloud PM

For starters, it’s crucial to address the retainage issue upfront. Have these discussions early, before you sign any construction contracts, and ensure it is in line with state laws. If any part of the contract dictates retainage that is not in compliance with state laws, don’t sign it. Outside of that, iron out details as much as possible, such as how the retainage will be held or if earning interest will be applied.

• With Cloud PM, users can set retainage as either fixed or variable, adapting to various project and contract needs.
• The AIA G703 is a continuation sheet to G702 (based on the schedule of values) that presents a breakdown of the summarized totals in the G702, often tailored to match how the project was bid.
• Construction retainage is a crucial aspect of project management, serving as a financial safeguard for project owners and stakeholders.
• Alternatively, you can purchase a one-year subscription for $1,599.99, which includes unlimited use on all of their 243 documents.
• Specifically we will show you how to complete form G-702 (Contractors Application for Payment) and form G-703 (Continuation Sheet).
• This form serves as both the Contractor’s application for current payment due and the Architect’s certification that payment is due to the Contractor.

Retainage accounting #

The AIA G702 form is a cornerstone in the construction industry, serving as both a payment application and a certificate for payment. Additionally, assets = liabilities + equity the contractor must request the amount of current payment due and provide a summary of change orders. Designed to offer convenient and complete forms, the AIA G702 ensures that both the contractor and the architect have a clear and standardized method for processing payments.

AIA’s standardized contract documents

This is where the architect, project manager, or property owner will sign once they review and approve your payment application. For general contractors, ensuring subcontractors submit accurate AIA billing applications might require guiding them through the steps below. These steps can also be followed by general contractors looking to submit their own AIA forms. Contractors often face a dilemma between following legal requirements and adhering to common industry practices. While official AIA documents are the norm, owners and architects often accept forms without the stamp, provided they replicate the standard format.

A negative number means that you deducted, or reduced, the amount of work from the contract. It’s also important to note that you should not include retainage percentages when calculating these numbers. The Work In Progress (WIP) schedule is an accounting schedule that’s a component of a company’s balance sheet. Bankruptcies in the construction industry are unfortunately very common. Punch list work might seem minor, but it has an improportionate impact on payment.

What is Overbilling? Construction Industry Accounting

As a contractor, all change orders need to be approved by the GC, owner, or architect. The “Architects certificate for payment” section doesn’t need to be filled out by contractors and can be left blank. This section is used to document the release of lien waivers and any other documents related to the payment. This section also includes a signature line for the contractor to sign and date the form.