AIA Billing for Contractors: The Complete G702/G703 Invoicing Guide

Why AIA Billing Matters to the Growing Contractor

As your construction firm transitions from basic residential T&M (Time and Materials) or fixed milestone contracts to commercial contracts, public works, or luxury custom builds, you will run headfirst into AIA billing for contractors.

Developed by the American Institute of Architects (AIA), the AIA G702 and G703 documents represent the universal standard for construction billing in North America. They exist to enforce structure, verify percentages, and protect all parties from financial risk.

For the contractor, this standard is a double-edged sword:

• The Benefit: It provides a predictable, standardized framework to request progress payments, bill for stored materials, and track outstanding retainage.
• The Burden: It is mathematically rigid. A rounding error of one penny, a misplaced value, or an unapproved change order will cause the architect or project owner to reject your application. When an invoice is rejected, you go to the back of the line—costing you weeks of cash flow.

To stay profitable and avoid funding multi-million-dollar jobs out of your own bank account, you must understand the rules of the game. Let’s break down how the G702 and G703 forms work, how to execute the calculations, and how to integrate this process into your daily job costing workflows.

The Two-Core Documents: G702 and G703

AIA billing is not a single form. It is a package composed of two distinct documents that must reconcile down to the penny:

1. AIA Document G702 (Application and Certificate for Payment): The summary sheet. It acts as the cover page, presenting the overall financial health of the contract—including the total contract sum, cumulative earnings, retainage withheld, previous payments, and the exact payment amount due this period.
2. AIA Document G703 (Continuation Sheet): The breakdown sheet. This is your Schedule of Values (SOV). Every task, scope of work, material delivery, and subcontractor cost is detailed line-by-line. Column G of the G703 dictates the values that populate Line 4 on the G702 cover page.

If the totals on the G703 do not exactly match the totals on the G702, the application is rejected automatically. The system requires absolute coordination.

Anatomy of the G702 Cover Page: The 9-Step Summary Table

The G702 features a metadata header at the top (listing the Project, Owner, Architect, Contractor, Application Number, and Date) followed by a 9-line table. This table summarizes your contract’s financial status to date.

+-------------------------------------------------------------+
|                     AIA G702 SUMMARY                        |
|                                                             |
|  1. Original Contract Sum..................... $250,000.00  |
|  2. Net Change by Change Orders...............   $12,500.00  |
|  3. Contract Sum to Date (1 + 2).............. $262,500.00  |
|  4. Total Completed & Stored to Date.......... $115,000.00  |
|  5. Retainage (10% standard)..................   $11,500.00  |
|  6. Total Earned Less Retainage (4 - 5)....... $103,500.00  |
|  7. Less Previous Certificates for Payment....   $62,000.00  |
|  8. Current Payment Due (6 - 7)...............   $41,500.00  |
|  9. Balance to Finish, Plus Retainage (3 - 6). $159,000.00  |
+-------------------------------------------------------------+

Here is a line-by-line guide to how these values are calculated:

Line 1: Original Contract Sum

The initial price agreed upon in the contract when the project was signed. This number remains static throughout the life of the project.

Line 2: Net Change by Change Orders

The cumulative sum of all approved change orders. If a change order adds $15,000 and another deducts $2,500, the net change is +$12,500.

Important: Never include pending or verbal change orders here. If the architect has not signed a formal change order document, it cannot enter the AIA billing cycle.

Line 3: Contract Sum to Date

Line 1 + Line 2. This is the new, legally binding contract total.

Line 4: Total Completed & Stored to Date

The total dollar amount of work physically completed plus the value of materials stored on-site (or at approved off-site facilities). This value is pulled directly from the bottom total of Column G on the G703 Continuation Sheet.

Line 5: Retainage

The portion of your payment withheld by the owner (typically 5% to 10%) as security for project completion. The G702 splits retainage into two parts:

• 5a: Retainage on Work Completed (e.g., 10% of Column D + E from G703).
• 5b: Retainage on Stored Materials (e.g., 10% of Column F from G703). The sum of 5a and 5b is entered as the total on Line 5.

Line 6: Total Earned Less Retainage

Line 4 minus Line 5. This represents the net amount of money you have earned on the project so far, after accounting for the retention holdback.

Line 7: Less Previous Certificates for Payment

The net amount you have already been certified to receive on all prior applications. This must equal Line 6 from the immediately preceding application. In application #1, this is always $0.

Line 8: Current Payment Due

Line 6 minus Line 7. This is the exact amount you are invoicing for during this billing period.

Line 9: Balance to Finish, Plus Retainage

Line 3 minus Line 6. The remaining dollar amount left to be billed on the contract, which includes the outstanding retainage that will be released at final closeout.

Anatomy of the G703 Continuation Sheet: Columns A to I

While the G702 acts as the summary, the G703 Continuation Sheet does the heavy lifting. It houses your Schedule of Values (SOV). The SOV divides the project into clear, measurable components (e.g., framing, dry-walling, HVAC rough-in).

For each line item on your SOV, you must fill out the following columns:

A Multi-Period Math Walkthrough (Application #1 & #2)

To understand how the math flows across multiple billing cycles, let us examine a hypothetical $250,000 commercial office build-out with a 10% retainage rate.

Step 1: Establish the Schedule of Values (G703 Setup)

Before work begins, we split the project into 7 line items:

1. Mobilization & Site Prep: $15,000
2. Demolition: $25,000
3. Framing & Drywall: $65,000
4. MEP Rough-in: $45,000
5. HVAC & Controls: $30,000
6. Finishes & Flooring: $40,000
7. Punch List & Closeout: $30,000

• Total Contract Sum (Col C): $250,000

Month 1: Mobilization, Demo, and Material Staging (Application #1)

During the first month, we complete 100% of Mobilization ($15,000), 80% of Demolition ($20,000), and 10% of Framing & Drywall ($6,500). Additionally, we purchase $10,000 worth of framing lumber. It is stored on-site but has not yet been installed.

Monthly G703 Calculation for Month 1:

• Item 1 (Mobilization):
  • Column D (Prev): $0
  • Column E (This Period): $15,000
  • Column F (Stored): $0
  • Column G (Total): $15,000
  • Column H (%): 100%
  • Column I (Balance): $0
• Item 2 (Demolition):
  • Column D (Prev): $0
  • Column E (This Period): $20,000
  • Column F (Stored): $0
  • Column G (Total): $20,000
  • Column H (%): 80%
  • Column I (Balance): $5,000
• Item 3 (Framing & Drywall):
  • Column D (Prev): $0
  • Column E (This Period): $6,500
  • Column F (Stored): $10,000
  • Column G (Total): $16,500
  • Column H (%): 25.38%
  • Column I (Balance): $48,500
• Items 4 to 7: $0 billed.

G703 Totals for Month 1:

• Scheduled Value (Col C): $250,000
• Work Completed This Period (Col E): $41,500
• Materials Stored (Col F): $10,000
• Total Completed & Stored (Col G): $51,500

Compiling Month 1 G702 Cover Page:

• Line 4 (Total Completed & Stored): $51,500
• Line 5 (Retainage - 10%):
  • 5a (10% of $41,500 Work Completed): $4,150
  • 5b (10% of $10,000 Stored Materials): $1,000
  • Total Retainage (Line 5): $5,150
• Line 6 (Total Earned Less Retainage): $51,500 - $5,150 = $46,350
• Line 7 (Less Previous Certificates): $0
• Line 8 (Current Payment Due): $46,350 - $0 = $46,350
• Line 9 (Balance to Finish): $250,000 - $46,350 = $203,650

The contractor sends Application #1 to the architect. The math is correct, the invoice is approved, and the contractor collects $46,350.

Month 2: Progressing Work & Installing Stored Materials (Application #2)

During Month 2, we complete the remaining Demolition ($5,000). We install the $10,000 of framing lumber that was stored in Month 1, and we execute another $22,500 worth of new framing work (bringing total framing work completed to $6,500 + $10,000 + $22,500 = $39,000). We also complete 40% of MEP Rough-in ($18,000) and 20% of HVAC ($6,000).

Managing the “Stored Materials” Transition:

This is where many contractors get tripped up. The $10,000 lumber stored in Column F last month has now been installed. Therefore:

1. It must be removed from Column F (reducing Stored Materials to $0).
2. It must be added to Work Completed.
3. Column D (Previous Work) for Framing is now $6,500 (the work completed last month).
4. Column E (Work Completed This Period) for Framing must be $32,500 (which represents the $10,000 of installed lumber plus the $22,500 of new labor). This keeps the total cumulative work completed at $39,000.

Monthly G703 Calculation for Month 2:

• Item 1 (Mobilization):
  • Column D (Prev Work): $15,000
  • Column E (This Period): $0
  • Column F (Stored): $0
  • Column G (Total): $15,000
  • Column H (%): 100%
  • Column I (Balance): $0
• Item 2 (Demolition):
  • Column D (Prev Work): $20,000
  • Column E (This Period): $5,000
  • Column F (Stored): $0
  • Column G (Total): $25,000
  • Column H (%): 100%
  • Column I (Balance): $0
• Item 3 (Framing & Drywall):
  • Column D (Prev Work): $6,500
  • Column E (This Period): $32,500
  • Column F (Stored): $0 (the lumber is now in the wall)
  • Column G (Total): $39,000
  • Column H (%): 60%
  • Column I (Balance): $26,000
• Item 4 (MEP Rough-in):
  • Column D (Prev Work): $0
  • Column E (This Period): $18,000
  • Column F (Stored): $0
  • Column G (Total): $18,000
  • Column H (%): 40%
  • Column I (Balance): $27,000
• Item 5 (HVAC & Controls):
  • Column D (Prev Work): $0
  • Column E (This Period): $6,000
  • Column F (Stored): $0
  • Column G (Total): $6,000
  • Column H (%): 20%
  • Column I (Balance): $24,000
• Items 6 to 7: $0 billed.

G703 Totals for Month 2:

• Work Completed to Date (Col D + E): $103,000
• Materials Stored (Col F): $0
• Total Completed & Stored (Col G): $103,000

Compiling Month 2 G702 Cover Page:

• Line 4 (Total Completed & Stored): $103,000
• Line 5 (Retainage - 10%):
  • 5a (10% of $103,000 Work Completed): $10,300
  • 5b (10% of $0 Stored Materials): $0
  • Total Retainage (Line 5): $10,300
• Line 6 (Total Earned Less Retainage): $103,000 - $10,300 = $92,700
• Line 7 (Less Previous Certificates): $46,350 (Pull from Line 6 of App #1)
• Line 8 (Current Payment Due): $92,700 - $46,350 = $46,350
• Line 9 (Balance to Finish): $250,000 - $92,700 = $157,300

In Month 2, the contractor bills and collects another $46,350. Note that even though the total completed and stored value increased by $51,500 (from $51,500 to $103,000), the retainage withheld increased by $5,150 (from $5,150 to $10,300).

Stored Materials: Crucial Rules & Risks

Billing for stored materials (Column F) is one of the most powerful cash-flow tools available to a growing contractor. It allows you to buy expensive materials—like custom cabinetry, structural steel, or copper piping—and invoice the client before they are installed. This prevents you from acting as an interest-free bank for the project owner.

However, architects and owners enforce strict rules to avoid paying for materials that might disappear, get damaged, or become subject to vendor liens.

1. On-Site vs. Off-Site Storage

• On-Site Stored Materials: Materials must be delivered, organized, and protected from the elements. They must be clearly marked for the specific project.
• Off-Site Stored Materials: If materials are stored at an off-site warehouse, they must be stored in a bonded, insured facility. The owner or architect will require a specific address, photos of the inventory, and verification that the materials are physically separated from your general inventory.

2. Mandatory Documentation

To successfully bill for stored materials, you will need to attach:

• A Bill of Sale: Proof that you have purchased the materials from the distributor and that the title of ownership is ready to transfer to the client.
• An Inventory Sheet: A clear breakdown of quantities, unit costs, and item descriptions matching the SOV line.
• Certificates of Insurance: Proof that the warehouse or site is covered against theft, fire, and water damage, listing the project owner as an additional insured.
• A Waiver of Lien: A conditional lien release from the material supplier, proving they have been paid (or will be paid with the proceeds of the draw) to ensure no supplier liens can be placed on the project.

Note: If you fail to submit these documents, the architect will immediately strike the Stored Materials line from the application, forcing you to revise and resubmit the invoice.

Retainage: The Cash Flow Time Bomb

In our multi-period math walkthrough, notice that by Month 2, the owner is holding $10,300 in retainage. By the end of a $250,000 project, a 10% retainage rate means the owner will hold $25,000 in cash.

In the remodeling and contracting industry, net profit margins typically run between 8% and 15%. If your net profit margin is 10%, and the owner holds 10% retainage, your entire net profit on the project is locked up in the retainage balance.

+--------------------------------------------------------------+
|                    THE PROFIT SQUEEZE                        |
|                                                              |
|  Project Value................................ $250,000.00   |
|  Actual Job Costs (Labor + Subs + Materials).. $225,000.00   |
|  Projected Net Profit (10%)...................  $25,000.00   |
|                                                              |
|  Retainage Withheld (10%).....................  $25,000.00   |
|  Cash Collected Prior to Closeout............. $225,000.00   |
|  Net Cash Flow Mid-Project....................       $0.00   |
+--------------------------------------------------------------+

If you do not track retainage separately from your regular Accounts Receivable (AR), you will find yourself in a constant working capital crunch. You will have to pay your crew, your subcontractors, and your suppliers long before you can recover the retainage from the owner.

Managing this cash flow challenge requires tight integration between your billing processes and your labor burden tracking. Every hour your crew spends on-site must be priced using a fully burdened rate—incorporating payroll taxes, insurance, and overhead—so that your mid-project billings cover your real cash expenses, leaving your net profit as the only figure deferred until the release of retainage. You can verify employee-specific values using our Labor Burden Calculator.

Why Manual AIA Billing Fails (Excel Pitfalls)

Many contractors try to manage AIA G702/G703 forms using Excel or Google Sheets templates. While this works on small, static projects, it quickly falls apart on complex projects for several reasons:

1. Cumulative Rounding Errors: Excel calculates percentages and decimals to infinite floating points, but construction checks are paid in dollars and cents. If you round a line item’s percentage up or down, the sum of your columns on the G703 will diverge from the G702 cover page by pennies. When this happens, the architect’s automated accounting portal will reject the invoice.
2. Double-Entry Lag: When you update an invoice, you must manually post those changes to your bookkeeping software (like QuickBooks) and your internal job costing sheets. This double-entry creates human error, leading to a disconnect between what you billed and what you spent.
3. Change Order Confusion: If a change order is approved, it must be added as a separate line item on the G703. If you accidentally roll change order costs into your baseline scheduled values, you destroy your ability to analyze your true profitability and open yourself up to payment disputes.
4. WIP Reporting Blind Spots: To know if you are over-billing or under-billing, you must compare your billing percentage (G702/G703) to your actual cost percentage (from timesheets, purchase orders, and subcontractor bills). Excel cannot do this dynamically, leaving you blind to margin erosion until the project closes.

Streamlining AIA Billing with RemodelFin

RemodelFin is designed specifically to eliminate the friction of manual construction accounting. Instead of treating job costing and invoicing as separate processes, RemodelFin unites them into a single, real-time dashboard.

Here is how RemodelFin handles the AIA billing workflow for contractors:

1. Unified Schedule of Values (SOV) Setup

When you set up a job in RemodelFin, you build your Schedule of Values directly inside the software. Every SOV line item maps automatically to a specific cost code. There is no double entry. Your billing structure and your cost-tracking structure are identical from day one.

2. Live Job Cost Integration

As your crew logs hours via timesheets, your field leads take pictures of receipts, and your subcontractors submit invoices, RemodelFin posts those costs in real time. Because the software calculates your burdened labor rates automatically, you see your exact cost-to-complete on every SOV line item.

3. Automated G702/G703 Generation

When it is time to submit your monthly draw, you do not need to pull out a calculator. RemodelFin reads your live project data, allows you to input the physical completion percentages, and instantly generates a G702/G703-style application. The software automatically:

• Calculates work completed from previous applications (Column D).
• Handles the transition of stored materials (Column F) to work completed (Column E).
• Computes retainage for both work and materials based on your contract’s parameters.
• Validates the math down to the penny to ensure zero billing portal rejections.

4. Direct QuickBooks Coordination

RemodelFin acts as the real-time, field-focused layer that works alongside your accounting software. When your draw application is approved, RemodelFin syncs the data directly to QuickBooks as an invoice, keeping your accounts receivable aging report perfectly accurate without manual data entry.

5. Automated Retainage Tracking

Never lose track of your retention cash. RemodelFin isolates outstanding retainage on your balance sheet and your project dashboard, showing you exactly how much retainage is owed, which milestones trigger its release, and how it impacts your company’s overall working capital forecast.

Take Control of Your Construction Invoicing

If you want to protect your profit margins and grow your business, you must stop treating invoicing as administrative homework. AIA billing for contractors is a critical financial process that directly determines your cash flow and operating capacity.

By automating your Schedule of Values, tracking your labor burden with precision, and using live job costing software like RemodelFin, you can submit flawless draw applications, eliminate invoice rejections, and secure your profits in real time.

Ready to streamline your progress draws and eliminate invoice rejections? RemodelFin’s 30-day free trial lets you track your first job at no cost. Start your free RemodelFin trial today and see your live profit margins on every billing cycle.