AIA Billing Explained: G702 and G703 Pay Applications, Step by Step

AIA billing is how construction companies bill and receive progress payments. Two forms are used in the process. G702, the Application and Certificate for Payment, and G703, the Continuation Sheet supporting it. G702 is the summary, and G703 is the detail underneath it, broken out line by line. Most commercial projects run this pair of forms every single month. Do it right the first time and you’ll get paid on time. If you get them wrong, you have to resubmit.

​This guide walks you through both forms, field by field. It explains how retainage moves through the forms, who signs what, and why pay applications get rejected more often than people expect.

​What a Pay Application Is, and Where G702 and G703 Fit

A pay application is a formal request for payment from a contractor for work completed to date. The contractor fills it in. The architect reviews and certifies it. The owner pays what the architect certifies, not necessarily always the full amount the contractor asked for. If the numbers don’t match, the architect approves a lower amount.

​G702 and G703 always come together. G702 includes the summary numbers: contract sum, total earned to date, retainage, prior payments, and amount due now. G703 has the line-item detail that adds up to those numbers, based on the contractor’s schedule of values set up at the start of the job. G703 is the worksheet; G702 is the total taken from it. For every number you see on the G702, you should see a line on the G703.

The G702: What Each Field Captures

The G702 captures everything an owner and an architect need in a single summary. Here’s what each part captures.

What It Shows	What It Actually Means
Original contract sum	The contract amount prior to any change orders
Net change by change orders	The sum of approved additions and deductions
Contract sum to date	Original contract changed to reflect approved changes
Total completed and stored to date	Taken from the total G703: All earned to date including stored materials
Retainage	The percentage held back from monies earned. Often 5-10%, but the contract determines the actual rate.
Total earned less retainage	What is due after retainage is deducted
Less previous certificates for payment	What previous applications already paid
Current payment due	This application’s request, the number everyone cares about
Balance to finish, including retainage	What’s left on the whole contract
Change order summary	A running log of change orders, separate from the main contract sum

 

The contractor signs the application at the bottom, often in front of a notary. The architect does the other half and certifies the amount they approve for payment. The owner pays that certified amount. A lower certification does not outright reject the application. It simply results in a smaller disbursement than requested.

The G703: How the Line-Item Detail Works

G702 gives one summary number. That number doesn’t tell you what bits are moving and what bits aren’t. G703 fixes that. It itemizes the contract, compares each item with a work item in the schedule of values, and tracks progress on each line item separately.

What It Shows	What It Actually Means
Scheduled value	The dollar amount this line item is worth under the contract
Previous progress	What the last application billed for this line
Work done this period	New progress on this line since the last application
Stored materials	Materials delivered to site but not yet installed
Total completed and stored	Previous progress plus this period’s work plus stored materials
Percent complete	Total completed and stored, divided by scheduled value
Balance to finish	What’s left to bill on this line item
Retainage held	The percentage held back on this line, same rate as the rest of the contract unless the contract says otherwise

Stored materials trips people up the most. A delivery counts toward the completed-and-stored total on the pay application. It still isn’t installed work. Stored materials count on the pay application but not as progress: keep uninstalled materials out of the cost-to-cost measure until they are installed. (Where the owner takes control of a significant third-party-supplied item well before it is installed, elevators, switchgear, a generator, ASC 606 has a specific treatment: the cost comes out of the progress calculation, and revenue on that item is recognized at cost, with no margin.)

A Pay Application Isn’t Revenue Recognition

The pay application relates to the company’s revenue recognition. They are not the same thing. G702 and G703 show what the contractor can request under the contract, schedule of values, approved changes, completed work, and retainage rules. Revenue recognition is a different question: How much revenue has the company earned as the work progresses?

Use the phrase, but anchor it to the standard: under ASC 606 the contract is recognized as the work progresses, and cost-to-cost is the input method that measures it.

Why is this difference important? A contractor can bill correctly on the pay application but still be underbilled on the revenue-recognition side, or vice versa. The G702 billed to date and the earned revenue on a WIP schedule answer different questions. Read them side by side, and you get the real story.

How Retainage Flows Through the Application

Retainage is deducted on every application, not once at the end. Say the G703 shows $100,000 of work completed this period and the contract calls for 10% retainage. The owner withholds $10,000. The contractor has earned the full $100,000; the amount payable on this application is $90,000.

Retainage is withheld on each application throughout the project. It rarely comes back all at once. Some contracts step it down when the job reaches a certain percent complete. Some release it in a lump sum at substantial completion. Some hold part of it longer, until the punch list is completed. It’s all in the contract, so read that section carefully. Don’t assume there’s a standard rate or release schedule.

Retainage is not a security deposit and is not governed by property-management trust rules. Under ASC 606, retainage that is contingent on future performance (completion of the project or final punch list sign-offs) is to be recorded on the balance sheet as a Contract Asset rather than as a trade receivable. It is moved to trade receivables only when the contractor’s right to payment is unconditional.

Certification, Notarization, and the Architect’s Role

The G702 is normally witnessed by a notary when the contractor signs. The application is therefore a sworn statement of the amount owed and the status of the work. It is no slight formality. When a contractor signs a notarized application that inflates progress, they are signing a document with real legal weight.

​The architect then compares the application to what is happening on the site. The architect doesn’t take the contractor’s numbers at face value. If everything is correct, the architect completes the certification section and confirms the amount due.

​If the architect doesn’t see the item as it was on site, the certified amount is lower than requested. The difference usually rolls forward to the next application rather than disappearing.

​The Eight Reasons Pay Applications Get Rejected

A handful of reasons account for most of the rejections. Process enough of them, and the same ones keep appearing. Most of them are caught by a system that flags the problem before submission. Catching it after submission does not help.

1. The G703 Total Doesn’t Match the G702 Summary

Even a minor rounding difference between the two documents can lead to a rejection. The point of the pair is that one supports the other perfectly. The same job cost and billing data feeds the G703 detail and the G702 summary in Sage 300 CRE. Mismatches usually mean that someone edited one form but didn’t regenerate the other. So we do the G703 detail first, and then let the totals flow up. We don’t manually tweak the G702 summary.

That’s precisely the discipline we run for a Canadian commercial construction group, which runs its monthly progress billings through Sage 300 CRE. The check is easy: put the total G703 line and the G702 field on either side of it. Do the same for every field, not just the bottom line. A mismatch can be hidden in retainage or in stored materials. It looks fine until someone actually lines up the two numbers.

2. A Change Order Complicates the Numbers

An approved priced change order is simple: the contract value goes up, the cost estimate goes up, and the application shows it cleanly. The hard case comes up all the time. The owner commands the crew to build something.

The scope is directed but the price is not set yet. The AIA G702 line 2 specifically requires a signed and fully approved change order. Standard AIA pay applications cannot be used to bill for unpriced change orders without a formal Construction Change Directive (CCD) from the owner and architect authorizing progress payments. The internal cost estimate reflects active work, but billing directed-but-unpriced work as if it were an approved change order will cause immediate rejection by the architect.

On the billing side the exposure is cash, not revenue. A directed change with no change order and no CCD is work the contractor is paying for through payroll and AP every month, with no line on the G702 to recover it. The number to watch is not the size of the unpriced balance but its age, every billing cycle it stays unpriced is another month of funding the owner’s change out of your own cash.

In Sage 300 CRE, every change order carries a status, so the ones still marked unpriced are visible in Job Cost, each with its date.

The check is simple, and it’s not something you can just run a report on. Find any change orders that are still marked unpriced. Count how many billing cycles it’s been sitting there.

We keep a change order log beside Sage and walk it at every month end. Someone has to ask how old it is every month, or the aging never gets caught.

3. Retainage Is Calculated at the Wrong Rate

This issue usually happens because the contract retainage terms changed partway through the job, a step-down triggered at a completion milestone, say, and the application never caught up. This scenario happens to QuickBooks users a lot. Retainage doesn’t necessarily stay in its field the way it does on a construction-native platform. It depends on how the file is set up.

Retainage tracking is native on the construction platforms we run, Sage 300 CRE and Yardi Voyager’s Construction Manager. On a general accounting platform it has to be built as a dedicated process outside the default job costing. We intentionally run the check manually. Pull the actual retainage clause from the contract.

Recompute the retainage for this application, line by line. Don’t just trust whatever rate the file defaults to.

4. Stored Materials Are Billed Without Documentation

Owners are entitled to ask for proof of delivery, evidence of title and insurance on stored materials, and most do. An application that misses that backup gets bounced. In Sage 300 CRE, stored material costs get coded and tracked with the paperwork attached right at entry.

We make one check before anything leaves; we match every line of material held on the G703 against the invoices and delivery records we actually have. Not just a dollar amount in the system. No paper, no number on the application.

5. The Application Isn’t Signed or Notarized

One of the simplest and most common reasons for sending back a correct application is a missing signature. This isn’t a systems issue. It’s a process issue. The check is legit.

Nothing leaves the office until someone has actually examined the signature block and the notary stamp, page by page. Don’t assume this one is still acceptable because the last one was.

6. Claimed Progress Doesn’t Match What the Architect Saw on Site

Architects walk the job. They are quick to flag a line item claiming more progress than visible.

We validate the billing percentage against the job cost data in Sage 300 CRE on every line before the submission. The check involves going through every G703 percentage against job-cost percent complete on the same line, and against the superintendent’s progress report, rather than just glancing at the total.

One overstated line can easily hide in a summary that otherwise looks fine.

7. The Schedule of Values Is Out of Date

If the schedule of values does not include a recent change order, it calls into question everything built on it. So does one that doesn’t match how the work is broken out anymore. This scenario is where the partnership between TimberScan and Sage 300 CRE is most important.

TimberScan won’t let an invoice through approval unless the invoice’s job and cost code already exist in Sage.

The check is a straight apples-to-apples comparison, done manually, line by line, between the current schedule of values and the change order log. It never errors on a missing entry. It just quietly stops matching, and nothing flags it on its own.

8. Required Lien Waivers Weren’t Included

Many owners won’t pay unless they have conditional or unconditional waivers. Even if the numbers check out, a missing waiver can delay the entire package. Both Sage 300 CRE and Yardi Voyager’s Construction Manager handle the accounting end of the process cleanly. Tracking waiver status is a document discipline built on top of that.

The check is a waiver log that is compared to the actual payment amount for each and every application. A missing waiver never appears as a wrong number. It looks just like a payment that doesn’t go out.

The same discipline that underpins all aspects of construction accounting is required to reliably avoid these eight rejections: feeding the application with clean, up-to-date data rather than frantically trying to reconstruct it the night before the deadline.

That’s exactly where solid construction accounting services make the difference, whether your books run on Sage 300 CRE with TimberScan, QuickBooks, or something else entirely. The pay application will become more of a formality rather than a fire drill if the schedule of values, change order log, and retainage tracking are kept current throughout the month.

​Frequently Asked Questions

What’s the difference between G702 and G703?

G702 is the summary: contract sum, retainage, and total due. G703 is the detail behind it, a line-by-line breakout against the schedule of values. G702 takes its totals directly from G703.

Does every construction project use AIA billing?

Not all construction projects utilize AIA billing. AIA forms are an industry standard, particularly on commercial projects, but not all contracts specify them by name. Some owners use their own pay application format or a platform-generated version instead.

Who has to sign the G702?

The contractor signs, typically with a notarized signature. The architect will separately complete a certification section certifying the amount they approve, which may be less than the amount requested by the contractor.

How does a pay application connect to a WIP schedule?

The billed-to-date number on a pay application goes straight into the billed side of a WIP schedule (August blog link), which compares it against earned revenue to show whether a job is overbilled or underbilled. A messy pay application process is usually a sign of a messy WIP position as well.

Why would an architect certify less than what was applied for?

Usually because something did not match what the architect saw on site: an overstated percent complete, an unpriced change order billed as settled, or missing documentation for stored materials.

Does the schedule of values ever change mid-project?

Yes, especially when change orders get approved. The schedule of values (September blog) will need to be updated to match. One of the biggest reasons a pay application is questioned is that it’s outdated.

Can a contractor bill for an unpriced change order?

No, not on a typical AIA G702 pay application. Line 2 only allows for executed and fully approved Change Orders. Unpriced change orders are not to be included on the pay application unless the owner and architect issue a formal Construction Change Directive (CCD) authorizing progress billing for that scope.

The Bottom Line

The G702 and G703 aren’t that hard if you know what each field is tracking. The discipline behind them is more important than the forms themselves. The cleanliness of a pay application depends on the schedule of values, change order log, and retainage tracking that feed into it. Every single one of those eight rejection reasons above can be traced back to one of those three going stale.

​If your pay applications keep coming back with questions, or building one still feels like starting over each month, book a free consultation, and we’ll walk through what a cleaner monthly process looks like for your jobs, no matter what platform your books run on.