The two documents
The G703 continuation sheet lists the schedule of values: each line of work with its scheduled value, work completed in prior applications, work completed this period, materials presently stored, total completed and stored to date, percent complete, balance to finish and retainage. The G702 summarizes it: original contract sum, net change by change orders, contract sum to date, total completed and stored, retainage, total earned less retainage, less previous certificates for payment, and the current payment due.
Every number on the G702 is derived from the G703, and every G703 line is cumulative. Application 12 has to agree with application 11 to the penny, or the owner’s reviewer sends it back.
Schedule of values
The schedule of values is set at contract award and the lines must sum exactly to the contract sum. It is usually organized by scope (and often by CSI division) rather than by cost code, so billing lines and job cost codes are related but not identical. Good software keeps the mapping so percent complete can be proposed from cost, while letting the project manager override it with the actual field progress.
- Lines sum to the original contract sum; change orders add lines or adjust them, never silently change the base
- Front-loading is common and legal within reason; the WIP schedule will show it as over billing
- Stored materials are billed on their own column and must be backed by invoices and, usually, insurance and a bill of sale
Retainage
Retainage (retention) is the percentage the owner withholds from each payment until completion, commonly 5–10%, often reduced at 50% complete, and in some states capped or restricted by statute. It applies separately to completed work and to stored materials, which is why the G702 carries two retainage lines. On the accounting side, retainage receivable is an asset distinct from ordinary accounts receivable; on the subcontract side, retainage payable is a liability you owe your subs on the same terms. Software that treats retainage as a discount or a credit memo will be wrong by the second application.
Change orders
Approved change orders change the contract sum and usually add G703 lines. Pending change orders do not; work performed against them shows up as under billing on the WIP schedule until they are approved. The G702 shows the net change by change orders as additions and deductions approved to date, so the system has to keep the change-order log tied to the billing, not in a separate spreadsheet.
What to look for in AIA billing software
- Cumulative applications that carry prior-period values forward automatically and cannot be edited out of sequence
- Retainage on work and on stored materials, with variable rates and release at a milestone
- Change orders that update the contract sum and the schedule of values together
- Percent complete proposed from job cost, overridable per line, with the override visible
- Output on the AIA-style layout owners expect (the official AIA forms are licensed documents; most systems produce an equivalent layout)
- Posting that books revenue, retainage receivable and the over/under adjustment correctly, with approval before the application is sent
- A subcontractor side that mirrors it: pay applications received, retainage withheld, lien waivers and compliance checks before payment
How Forge ERP handles progress billing
Forge creates the schedule of values from the awarded estimate with lines that sum exactly to the contract, bills on it cumulatively with retainage tracked separately on work and stored materials, and carries approved change orders into both the contract sum and the billing lines. On the payable side, subcontractor pay applications are tracked against the subcontract with retainage withheld and payment eligibility checked before anything is released. Applications are prepared for review and approved before they go out.
Forge ERP covers projects, purchasing, accounts payable, billing and receivables, job cost and WIP, reporting and close. Payroll runs in your payroll provider and lands in Forge as job-costed labor with burden. Forge is in beta with a 14-day free trial.
Frequently asked
- Do I need the official AIA forms?
- AIA G702 and G703 are copyrighted documents licensed by the American Institute of Architects. Many owners accept an equivalent layout with the same fields; some contracts require the licensed forms. Check your contract.
- How is retainage accounted for?
- Retainage withheld by your customer is retainage receivable, separate from accounts receivable, until it is released. Retainage you withhold from subcontractors is retainage payable. Both should be tracked per contract, not netted into ordinary AR and AP.
- What happens when percent complete on the billing differs from job cost?
- That is normal: billing follows field progress on the schedule of values, while job cost follows dollars spent. The difference is exactly what the WIP schedule measures as over or under billing.