Construction Invoicing Guide for Contractors

What Is Construction Invoicing?

At a basic level, construction invoicing is how you ask to get paid for work and materials on a project. You bill for what’s been done, send supporting paperwork, and the owner or GC reviews it before releasing funds.

The twist is that construction is rarely just a one-and-done invoice. Most jobs are billed over time: monthly, at milestones, or when certain percentages of work are complete. That’s where progress billing and pay applications come in.

Construction Invoicing vs. a “Regular” Invoice

If you’ve ever sent a simple invoice for a small job, you know the pattern: one page, a short description, a total, and payment terms. Construction projects often need more detail than that.

Compared to a regular invoice, a construction invoice or pay application usually needs to account for:

• Work divided into line items or phases (sometimes using a Schedule of Values (SOV))
• Partial completion of each line item (e.g., 30%, 60%, 100%)
• Retainage withheld by the owner or GC
• Stored materials that have been delivered but not yet installed
• Approved change orders that increase or decrease the contract amount
• Previous amounts billed and paid to date

On many commercial jobs, this level of detail is handled through AIA-style pay apps – the G702 Application and Certificate for Payment plus the G703 Continuation Sheet. On smaller or more informal projects, you may use detailed construction invoices instead of formal AIA forms.

Common Ways Contractors Invoice Construction Work

Most contractors and subcontractors fall into one of a few billing patterns:

1. Simple Lump Sum Invoice

Used on small jobs, service work, or residential projects. You send an invoice for:

• A flat amount (e.g., “Replace water heater” or “Patch and paint office walls”)
• Sometimes with a deposit invoice up front and a final invoice at completion

This can work when the dollar amounts are small and the owner isn’t demanding detailed backup.

2. Progress Billing on Larger Jobs

On bigger projects, especially commercial or multi-month jobs, you’ll usually bill monthly using progress billing:

• You bill for a percentage of each line item or phase completed to date
• You track previous work billed, work this period, and total complete
• You may bill for stored materials sitting in a warehouse or on site

Some contractors handle this in a spreadsheet or basic invoice template. Others use full AIA-style pay applications to keep everything organized and consistent.

3. AIA-Style Pay Applications

On many commercial projects, the contract will specify that you must use AIA forms – or at least AIA-style billing – for payment.

In that case, your “invoice” is really your Application and Certificate for Payment. The G702 summarizes contract value, previous payments, work this period, retainage, and balance to finish. The G703 breaks the work down into a structured Schedule of Values.

If you’re not familiar with these forms yet, our guide How to Fill Out AIA G702 & G703 walks through each major field step-by-step.

Key Parts of a Construction Invoice or Pay Application

Whether you’re using a simple invoice or a full AIA pay app, most construction billing includes the same core building blocks:

• Project information – job name, address, project number, and customer/GC details
• Your company information – legal business name, address, and contact info
• Invoice or pay application number – helpful for tracking and payment status
• Billing period – dates covered by this particular invoice (e.g., “Through 04/30/2025”)
• Line items or SOV breakdown – what you’re billing for, broken into logical chunks
• Previous billed to date – how much has already been invoiced and paid
• This period amount – the new work or materials you’re billing on this draw
• Retainage – how much is being held back, either by line item or overall
• Change orders – approved changes that affect the contract total
• Payment terms – due date, late fees if applicable, and payment instructions

The more clearly this information is laid out, the easier it is for an owner, GC, or lender to review your billing and keep payments moving.

Construction Invoice vs. Pay Application (Quick Comparison)

A question that comes up a lot is: “Do I send a regular invoice, or do I submit a pay application?”

If your contract specifically calls for AIA billing, the pay application effectively is your invoice. On other jobs, a well-structured construction invoice can still borrow ideas from AIA-style billing to make your paperwork easier to approve.

Progress Billing and Progress Payment Invoices

When you hear terms like progress billing or progress payment invoice, they’re usually talking about the same idea: billing as the work progresses instead of all at once.

Typical pattern:

• Contract is broken into phases or SOV line items
• Each month, you bill for the percentage of each item that’s complete
• You might also bill for stored materials, especially on long-lead items
• Retainage is held back until substantial or final completion

Whether you present that as a detailed construction invoice or a formal AIA pay application, the math underneath is the same. That’s exactly the math that PayAppPro handles for you.

How Subcontractor Invoicing Fits Into the Bigger Picture

If you’re a subcontractor, construction invoicing usually flows upstream:

• You bill the GC with your invoice or pay application
• The GC rolls multiple subs into their own billing to the owner
• The owner or lender reviews, approves, and funds the draw

That means your paperwork has to match what the GC needs: correct format, clear SOV breakdown, and backup for stored materials and change orders. Clean invoicing makes it easier for the GC to turn around and get you paid.

Lien Waivers and Supporting Documents

On most commercial jobs, your invoice or pay application isn’t the only thing required for payment. You’ll often be asked to submit:

• Lien waivers (conditional or unconditional, progress or final)
• Change order logs and signed change order documents
• Updated insurance certificates or compliance docs
• Supplier invoices when billing stored materials

The more organized this backup is, the easier it is for the GC or owner to approve your billing without a lot of back-and-forth emails.

Common Construction Invoicing Mistakes

A few patterns show up over and over when contractors and subs struggle with billing:

• Using a generic invoice that doesn’t match the contract or SOV
• Over-billing line items early in the project and getting flagged by the owner
• Forgetting to include retainage or miscalculating it
• Billing stored materials incorrectly or without proper documentation
• Letting change orders pile up instead of getting them into the billing
• Sending unconditional lien waivers before the payment actually hits the bank

If any of this sounds familiar, you’re not alone. It’s exactly why many contractors move from spreadsheets and generic invoices to more structured pay application tools.

How PayAppPro Fits Into Your Construction Invoicing Workflow

PayAppPro is focused on the construction side of invoicing – especially AIA-style billing. Instead of manually wrestling with formulas in Excel, you:

• Set up your project and Schedule of Values
• Enter work completed and stored materials for each billing period
• Let the system handle previous billed, this period, retainage, and balance to finish
• Generate clean G702 and G703 PDFs ready to submit
• Attach lien waivers and other backup documents

For many contractors, PayAppPro becomes the backbone of their “construction invoicing” process on commercial jobs. You still control what you bill and when – the software just keeps the math and paperwork consistent from month to month.

Bringing It All Together

Construction invoicing covers a lot of ground: simple invoices, progress billing, stored materials, retainage, change orders, lien waivers, and more. The goal isn’t to make it complicated – it’s to present the work you’ve done in a way that an owner or GC can approve quickly, without guesswork.

Whether you’re just starting to formalize your billing or you’ve been filling out AIA forms by hand for years, a structured tool can take a lot of the stress out of the process.

Related Guides

• AIA Billing vs Non-AIA Construction Billing
• Contractor Invoice Example
• What Is a Schedule of Values (SOV)?