Key components of AIA billing<\/h2>\n
Certain AIA billing terminologies are essential to understand its strategy easily:<\/p>\n
Financial components<\/h3>\nSchedule of values (SOV)<\/h4>\n
SOV is an integral and crucial part of AIA billing. This document includes the project\u2019s milestone payment and the total payable amount. It shows the payment breakdown across various phases of the project. This enables both contractors and owners to easily track the progress and relevant payment flow.<\/p>\n
Retainage<\/h4>\n
Retainage is a small portion of the total project cost that contractors hold. It is a win-win for both the construction company and the client (the project owner). For contractors, it refers to incentives and encourages quality work. For owners, it provides a sense of security that final payment will not be released until satisfactory completion.<\/p>\n
Change of orders<\/h4>\n
It is referred to as a Construction Change Order (CCO). This formal document records any approved modification to the original construction. The change might be related to material, work schedule, and pricing. It also includes the reason for the change and the signature of the authorized person who approved the change. This recording ensures that contractors receive the amount aligned with any changes to the project.<\/p>\n
Material tracking and documentation<\/h3>\nStored materials<\/h4>\n
Certain materials in the construction projects are purchased but not used. HVAC equipment, structural sheets, and plumbing fixtures are such materials. These materials are recorded in the G703 Continuation Sheet. This simplifies tracking these materials for the contractors and includes them in an invoice when used in the work. This ensures that the contractor receives the appropriate payment.<\/p>\n
Stored material invoices<\/h4>\n
Stored material invoices include details of materials purchased but not yet installed. Thus, these invoices are also important supporting documents for payment requests for all purchased materials. Architects, lenders, and owners ensure the requested amount is accurate and confirm the quantity and unit cost.<\/p>\n
Delivery slips<\/h4>\n
Delivery receipts<\/a> or packing slips are another supporting document in the process. These are especially helpful when the contractor requests payment for the stored materials. Delivery slips make it easy to verify that materials have been delivered and are subject to payment.<\/p>\n Certain other documents are also helpful in the AIA procedure. These are referred to as supporting documents that streamline the overall process.<\/p>\n In the AIA billing process, a Certificate of Insurance (COI) serves as proof that the contractor has the required insurance coverage. Workers’ compensation, liability, and business owners’ policies are types of insurance.<\/p>\n Lien waivers are usually submitted along with the payment application. Contractors, subcontractors, and suppliers use this document to agree to give up their right to place a mechanic\u2019s lien on the property. These documents primarily serve as evidence of payment for the materials and services provided.<\/p>\n This document provides details on pending and approved change orders. It is necessary to keep this log sheet up to date. It is useful in the AIA billing for construction because it provides the required information for the change order.<\/p>\n Inaccurate billable hours mean inaccurate billing.<\/strong><\/p>\n Track every second of your project to ensure accurate billable hours that reflect proper billing.<\/p>\n Try Moon Invoice<\/a><\/p>\n<\/div>\n There are two important payment application forms. In the construction industry, both these documents are crucial.<\/p>\n The G702 document is a payment request that provides a summary of the project along with the requested amount. This comprehensive document covers the following data:<\/p>\n G703 is a supporting document of G702 and is often referred to as a Continuation Sheet. It provides a detailed breakdown of the construction work performed. The form of this document is in accordance with the SOV and consists of the following details:<\/p>\n The contractor prepares the Schedule of Values (SOV) using the AIA G703 Continuation Sheet, which provides a breakdown of the work and related costs. The architect and owner review this before the billing process begins.<\/p>\n The contractor starts recording the portion of work completed (in percentage), change orders, and retainage deductions in the Schedule of Values (SOV). Additionally, he can also cover the retainage, eligible stored materials, or any other adjustments.<\/p>\n Any changes to material, cost, or anything else should be reflected in SOV immediately. Take approval from higher authorities before including these changes in the final payment application.<\/p>\n The AIA G703 Continuation Sheet covers all the line items, including current completed work, approved change orders, retainage, and stored materials. Later on, the AIA G702 Application and Certificate for Payment includes the details in summary form and serves as a payment request.<\/p>\n The contractor then submits the completed G702 and G703 documents to the architect or the owners. The architect later reviews the payment request and overall things and certifies it when everything is in compliance with the contract.<\/p>\n The owner released the payment in accordance with the contract terms after the document was approved. The total payable amount reflects the approved stored materials, completed work, retainage, and other approved changes.<\/p>\n Contractors often encounter various issues when dealing with AIA billing. These circumstances adversely affect the billing process.<\/p>\n AIA billing documents, such as G702 (Application and Certificate for Payment) and G703 (Continuation Sheet), clarify payment requests and approvals. This keeps the contractor, owner, and other involved parties on the same page, reducing confusion and misunderstandings. Contractors experience a smooth payment process, and owners get full transparency into where their payments are going and the status of the work.<\/p>\n Many construction contractors also require lien waivers from suppliers, contractors, and subcontractors before payment. This reduces the legal and financial risk and protects the owner’s property from a mechanic\u2019s lien. It includes clear records of completed work, pending tasks, approved change orders, and overall status, which are useful for tracking project progress.<\/p>\n Overall, this approach promotes transparency and trust among project participants and saves time by streamlining billing. It reduces the risk of disputes and contributes to the success of the construction project.<\/p>\n Usually, AIA billing is complex and time-consuming. Activities such as change orders, project progress tracking, retainage, and payment applications make the process long and complicated. That is what requires accurate project tracking, careful record-keeping, and the right calculations.<\/p>\n However, billing software such as Moon Invoice can streamline the overall construction invoicing. It allows contractors to manage projects, track billable hours<\/a> accurately, and create professional invoices using templates. The system also allows them to create better estimates and easily convert them into invoices with a single click. Similarly, it allows the creation of POs and receipts.<\/p>\nOther supporting documents<\/h3>\n
Insurance certificate<\/h4>\n
Lien waivers or releases<\/h4>\n
Change order log<\/h4>\n
Important AIA billing forms<\/h2>\n
1. G702 document: Application and certificate for payment<\/h3>\n
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2. G703 document: Continuation sheet<\/h3>\n
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AIA billing process: Key steps involved<\/h2>\n
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\nYou might be eager to know how AIA billing in construction works. Here are the key steps involved for the successful operation:<\/p>\n1. Schedule of values<\/h3>\n
2. Measure the progress and stored materials<\/h3>\n
3. Approved change orders<\/h3>\n
4. Getting G702 and G703 forms ready<\/h3>\n
5. Submission and review<\/h3>\n
6. Releasing payment<\/h3>\n
Common challenges in AIA billing and solutions<\/h2>\n
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Solution<\/h3>\n
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Why is AIA billing crucial in the construction industry?<\/h2>\n
Role of Moon Invoice in AIA billing<\/h2>\n