Construction Payment Applications: Contractor Guide
“Payment application” is just the formal way of saying, “Here’s what we’ve built so far, and here’s what we’re billing this period.” This guide explains what a construction payment application is, what needs to be included, and how AIA-style G702/G703 forms keep everything organized.
What Is a Construction Payment Application?
A construction payment application is a formal request for payment on a project. Instead of just sending a one-line invoice, you show:
- How much work has been completed to date
- How much you’re billing this period
- How much retainage is being held
- What’s left to finish on the contract
On many commercial jobs, this is done using AIA-style forms – most commonly the AIA G702 Application and Certificate for Payment and AIA G703 Continuation Sheet. On other jobs, the owner or GC may have their own “payment application” form or portal that works in a similar way.
Why Payment Applications Exist (Instead of Simple Invoices)
Owners, GCs, and lenders want a clear picture of where the project stands before releasing funds. A structured payment application:
- Shows progress by line item instead of a single lump sum
- Links back to an approved Schedule of Values (SOV)
- Tracks retainage and what has been paid to date
- Helps prevent over-billing or front-loading
- Creates an audit trail for the project’s financial history
For you as a contractor or subcontractor, it’s the paperwork step between doing the work and actually getting paid.
Key Pieces of a Construction Payment Application
Whether you’re using AIA forms, an owner-provided template, or software, most payment applications share the same building blocks:
1. Project and Contract Information
At the top of the payment application, you’ll typically see:
- Project name and address
- Owner and GC information
- Contractor or subcontractor name
- Original contract sum
- Approved change orders to date
2. Schedule of Values (SOV)
The SOV is the backbone of your billing. It’s the breakdown of your contract into line items with a dollar value assigned to each. For example:
- 01 – Sitework
- 02 – Concrete
- 03 – Structural Steel
- 04 – Mechanical / Electrical / Plumbing
Each billing period, you update how much of each line item is complete. If you need a starting point, you can download our free SOV template.
3. Work Completed This Period
Payment applications usually separate:
- Work completed in previous applications
- Work completed this period
- Materials presently stored (not yet installed)
This lets reviewers see how the job is progressing over time, not just the total billed amount.
4. Stored Materials
Many contracts allow you to bill for stored materials so you’re not financing expensive equipment or fixtures out of pocket. The amounts are tracked separately and require extra backup (invoices, photos, insurance, storage locations).
For a deeper dive, see How to Bill for Stored Materials on AIA G702/G703.
5. Retainage
Retainage is the portion of payment held back until certain milestones are reached (often 5–10%). Your payment application calculates:
- Total completed and stored to date
- Retainage held
- Net amount due this period
6. Change Orders
As the job evolves, approved change orders modify the contract value. Your payment application needs to:
- Reflect the current adjusted contract amount
- Include SOV lines or sections for CO work
- Ensure you only bill for approved changes
7. Lien Waivers and Backup Documentation
On many projects, a payment application is considered incomplete without:
- Lien waivers (conditional or unconditional)
- Supplier invoices and proof of payment
- Change order approvals
- Stored-material documentation
Your pay app gets processed faster when all of this is bundled together in a standard format.
How AIA G702 & G703 Fit Into Payment Applications
AIA forms are simply standardized versions of a construction payment application. In an AIA-style setup:
- The G703 Continuation Sheet holds your SOV and line-item progress
- The G702 summarizes the totals, retainage, and amount due this period
- Supporting docs (COs, waivers, invoices) ride along with the pay app package
Even when a project doesn’t strictly require official AIA forms, many GCs ask for “AIA-style” billing because they’re used to this level of detail and structure.
Common Reasons Payment Applications Get Rejected
Most pay apps don’t get rejected because of the work in the field – they get rejected because the paperwork doesn’t line up. Common issues include:
- SOV total doesn’t match the contract amount (including change orders)
- Line-item math errors on the continuation sheet
- Stored materials billed without proper backup
- Retainage calculated incorrectly or inconsistently
- Mismatch between payment application amounts and lien waivers
- Missing signatures or incomplete project information
Our checklist Common G702 & G703 Errors (and How to Avoid Them) digs into these in more detail.
How Software Simplifies Construction Payment Applications
You can absolutely manage payment applications in spreadsheets and PDFs – but it takes discipline and a lot of double-checking. Software like PayAppPro helps by:
- Storing your SOV and project info in one place
- Handling G703 line-item math and G702 totals for you
- Keeping track of work completed, stored materials, and retainage by period
- Generating AIA-style G702/G703 PDFs with a few clicks
- Letting you upload and organize backup files with each pay app
- Generating lien waivers directly from your billing data
The goal isn’t to make billing more complicated. It’s to take the “I hope I didn’t miss anything” feeling out of every payment application you send.
Getting Started on Your Next Payment Application
If you’re staring at a blank “payment application” request from a GC or owner, here’s a simple path:
- Build or confirm your Schedule of Values (SOV).
- Gather your contract, approved change orders, and prior billing history.
- Decide how much work is complete on each SOV line this period.
- Identify any stored materials you’re allowed to bill for.
- Calculate retainage and the net amount due.
- Prepare any required lien waivers and backup documentation.
- Use AIA-style G702/G703 or your GC’s standard form to package it all.
Doing this once in a spreadsheet is fine. Doing it every month on multiple projects is where software starts to pay for itself.
Related Guides
Build AIA-style G702/G703 pay apps, track stored materials and retainage, and generate lien waivers from one simple, contractor-focused workflow.