A pay application is how most commercial construction bills. Instead of an invoice for a lump sum, the contractor applies for payment against the contract’s schedule of values, line by line, for the work completed and the materials stored in the period. The AIA documents are the common form: the G702 is the application and certificate for payment, with the contract sum, approved change orders, the total completed and stored to date, retainage, previous payments and the current amount due; the G703 is the continuation sheet that lists every line of the schedule of values with its scheduled value, work completed this period and to date, stored materials, percent complete, balance to finish and retainage. Many owners use their own forms, but the shape is the same.
The pay application is the whole month’s cash in one document. It is reviewed by the owner or the owner’s architect, often line by line, and overbilling on a line can send the application back or get it certified for less. On the other side, each subcontractor’s pay application bills its subcontract the same way, and the general contractor’s application to the owner should line up with what the subs have billed and what has been approved.
Contracts and billing generates the pay application from the owner contract’s schedule of values: enter work completed and materials stored, let retainage calculate at the contract’s rate, review the AIA-style G702 and G703, route it for approval and send the PDF. An approved owner change order adds its lines to the schedule, so the next application already carries it. Each sub’s pay application bills its subcontract line by line, and overbilling on any line shows before it is approved. The approved application posts to accounts receivable as an invoice with its retainage held, and the owner can see where it stands and pay it through the portal.
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