AIA billing is the progress billing method most US contractors use to get paid on larger jobs. Each billing period, you submit a payment application showing how much of each line of work is complete, the owner's representative certifies it, and you get paid for that share, minus retainage. Simple on paper. In practice, it's where cash quietly gets stuck.

What Is AIA Billing?

The name comes from the American Institute of Architects, whose G702 and G703 forms became the standard format for construction payment requests in the US. Instead of invoicing a fixed amount on fixed dates, you bill for the percentage of work actually completed in each period.

That's why it's also called progress billing. You get paid as the building goes up, not when the keys are handed over.

How the G702 and G703 Fit Together

Think of the pay application construction teams submit each month as two pages that only make sense together. That's an AIA payment application in one sentence.

The G702 is the cover sheet. It summarizes the contract value, approved changes, work completed to date, the amount held back, what's been billed before, and what's due now. The G703 is the continuation sheet behind it. It breaks the contract into individual lines of work and tracks progress on each one.

Change a number on the G703 and the G702 changes with it. That link is the whole point.

The official G702 and G703 are trademarked documents, licensed by the AIA. Many contractors use an AIA-style version built on the same structure, and if you want one to work from, this AIA-style payment application template follows that exact layout.

What Is a Schedule of Values?

The schedule of values is the backbone of every pay app. It splits the total contract into line items, such as site work, foundations, framing, electrical and finishes, each with an agreed dollar value. You'll often see it shortened to SOV.

Every billing period, you report progress against those lines. So if framing is worth $180,000 and it's half done, you bill $90,000 for framing, cumulatively.

Get it wrong at the start, and every pay app after it inherits the mistake.

Where the Cash Goes: Four Gaps in Construction Progress Billing

It doesn't fail in one dramatic moment. It leaks through four gaps, every month.

Retainage: Earned but Not Paid

Retainage is the share of each payment the owner holds back until the project is substantially complete. It protects the owner if work needs fixing at the end.

For the contractor, it's money you've earned, spent on labor and materials, and won't see for months. On a contract with a 10% holdback, every $100,000 of certified work puts $90,000 in your account and parks $10,000 until closeout.

The rules on retainage in construction vary by contract and by state. On federal projects, the Federal Acquisition Regulation caps it at 10% of the approved amount and says it shouldn't replace good contract management. Private contracts set their own terms, so read yours before you price the job.

Change Orders Waiting for Signatures

The owner asks for an extra window. The site lead says yes. The crew builds it.

Nobody signed the change order.

Until it's approved, that work can't appear on your pay app. You've paid for the labor and materials, and the invoice for them doesn't exist yet. Multiply that by a dozen small "while you're here" requests, and a profitable job starts running on your own cash.

Stored Materials You've Already Paid For

Steel arrives early to lock in the price. Good decision. Now it's sitting on site, paid for, not yet installed.

Most contracts let you bill for materials on site, but only with proof: supplier invoices, delivery records, sometimes photos or insurance. Miss the paperwork and the architect strikes the line. The supplier still wants paying on their terms.

The Certification Lag

Submitting a pay app doesn't mean getting paid. The architect or owner's representative reviews it, may adjust it, then certifies it. Only then does the payment clock start, based on whatever terms your contract sets.

Weeks can pass between finishing work and seeing money for it. Your payroll doesn't wait that long.

A Worked Pay App: One Billing Period, Line by Line

Here's an illustrative example. A $1.2 million contract, a 10% holdback, one billing period.

This month the contractor completes $70,000 of contract work, stores $60,000 of materials on site, and builds $48,000 of extra work that hasn't been approved in writing yet. The pay app requests $117,000: $130,000 of completed and stored value, minus $13,000 held back.

Then the architect reviews it. The delivery records for that steel are missing, so the line comes out.

The contractor delivered $178,000 of value and will be paid $63,000, eventually.

Nobody cheated. Nobody made a big mistake. That $115,000 gap is just the four gaps above, landing in the same month. And that's why construction cash flow can look healthy on the project report and feel like a crisis in the bank account.

How to Close the Gaps

You can't remove these gaps completely. You can make them much smaller.

1. Build a smart schedule of values. Break early work into enough lines that you can bill it as it happens, instead of waiting for large items to reach meaningful percentages.
2. Get every change signed before the work starts. No signature, no work. It feels harsh the first time. It feels normal by the third.
3. Document materials the day they arrive. Supplier invoice, delivery record and photos, filed against the pay app before you submit it.
4. Know your dates. Match your billing cycle to the owner's approval cycle and, on financed projects, to the lender's construction draw schedule.
5. Use conditional waivers. A conditional lien waiver only takes effect once payment is received, so you're not signing a full lien waiver for money that hasn't arrived.
6. Track the holdback like a receivable. It's your money. Know exactly how much is held, on which job, and when it's due for release.

How Enerpize Handles AIA Billing

Enerpize is a cloud-based, all-in-one ERP platform for small and medium-sized businesses, combining accounting, inventory, HR, sales, and CRM in a single system.

For contractors, that means the pay app, the project costs and the books sit in one place, not in three spreadsheets that never agree.

Invoices With Retention Calculated In

A construction invoice can be issued in installments or as a lump sum, with the retention amount calculated and shown on it. Retention is calculated on the total after tax, and when the held amount is released at project close, it's tracked in the system without a separate manual entry.

Project Budgets Mapped to Cost Centers

Each project gets its own budget and cost breakdown, with profitability and cost reports per project. Schedule of values lines can be mapped to project cost centers, so you can see whether a job is holding against its budget at any billing period.

Labor Allocated to the Right Job

Worker and engineer time can be allocated to the project they worked on, and those labor costs flow into the project's cost reports. Your job costs come from real data, not end-of-month estimates.

Supplier Records Behind Materials on Site

Suppliers, subcontractors and clients live in one place, and supplier invoices are recorded against project budgets. When a claim for materials on site needs documentation, the purchase record is already there.

Back to Friday's Payroll

Same contractor. Same job. Same month.

This time the extra window was approved in writing before the crew touched it. The steel's delivery records were filed the day it arrived. The pay app goes in with every line supported, and the holdback balance is sitting in a report, not in somebody's head.

The gaps didn't disappear. They just stopped being surprises.

That's what good AIA billing does. It doesn't make construction less complicated. It makes the cash predictable.

Key Takeaways

1. The AIA method pays contractors for the percentage of work completed each period, measured against the agreed line items.
2. The G702 summarizes the payment request, and the G703 breaks it down line by line.
3. Cash gets stuck in four places: the holdback, unsigned changes, undocumented materials on site and the certification lag.
4. On federal projects, the holdback is capped at 10% of the approved amount. Private contracts set their own terms.
5. Signed changes, same-day materials documentation and conditional waivers protect your construction cash flow.
6. Tracking the holdback and project costs in one system turns billing surprises into numbers you can plan around.

Frequently Asked Questions

What is progress billing?

It's a billing method where you invoice for the portion of a project completed during each period, instead of billing the full amount at the end. It's standard on larger construction jobs.

How does AIA billing work?

Each period, the contractor submits a payment application showing progress on every line of the contract. The architect or owner's representative reviews and certifies it, and the owner pays the certified amount minus the holdback.

What is a pay app in construction?

A pay app, or payment application, is the formal request for a progress payment. In the AIA format, it combines a summary cover sheet with a line-by-line continuation sheet.

How is retainage calculated?

It's a percentage of each certified payment, set by the contract. At 10%, a $50,000 certified amount means $45,000 is paid now and $5,000 is held until the project reaches substantial completion.

Disclaimer: This article is general information, not legal or accounting advice. Retainage and payment terms vary by contract and by state. AIA, G702 and G703 are registered trademarks of the American Institute of Architects. The author works at Enerpize.

About the Author

Omar El Bahr is a Senior Digital Growth Specialist at Enerpize, where he leads SEO, content strategy, and organic growth across international markets. He is a Forbes Communications Council contributor and has written for Entrepreneur on business communication and digital strategy.

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