How progress billing on commercial construction actually works: the G702 and G703, the schedule of values behind them, retainage, and a step-by-step walkthrough of filling one out so the math ties.
On most commercial construction contracts you do not send a plain invoice. You submit a pay application, a standardized package that shows how much of the contract you have completed this period, certifies the amount to the owner and architect, and requests payment for it. The format nearly everyone recognizes comes from the American Institute of Architects (AIA): the G702 and its companion G703.
The point of the standard is trust. The owner is releasing money against work they cannot fully verify themselves, so the pay application ties every dollar requested back to a line of contracted work, shows the running history of what has been billed, and carries an architect's certification that the work is in fact in place. It is progress billing done in a form the owner, architect, lender, and surety all read the same way.
Two documents, one package: the G702 is the summary and the certificate, the G703 is the line-by-line detail behind it.
The G702, Application and Certificate for Payment, is the one-page summary. It carries the contract totals (original contract sum, net change orders, total completed and stored to date, retainage, previous payments, and the current payment due) plus the signature blocks where the contractor applies and the architect certifies.
The G703, Continuation Sheet, is the detail. It is your schedule of values laid out as rows, one per portion of the work, showing for each line how much has been completed this period, how much previously, any stored materials, and the resulting totals and percentages.
They are two halves of one thing: the G703 totals roll up into the G702. The "total completed and stored to date" on the summary is simply the sum of that column across every G703 line. If those two numbers do not match, the pay application is wrong. That tie is the first thing a reviewer checks.
Everything in a pay application rests on the schedule of values (SOV), the breakdown of your total contract price into individual line items of work, agreed with the owner at the start of the job. Mobilization, tear-off, insulation, membrane, flashings and metal, and so on, each assigned a scheduled value, all summing to the contract sum.
Each billing period, every SOV line on the G703 carries a handful of columns:
Because the SOV is fixed, your billing is really just a matter of moving completion percentages up each line as the work progresses. That discipline is what keeps progress billing honest, and it is why the SOV is worth negotiating carefully before the first pay app.
Retainage (or retention) is a portion of each payment the owner withholds until the job is substantially or finally complete, as security that you will finish and close out the work. On commercial construction it is commonly in the range of about 5% to 10% of each progress payment, though the exact percentage and the rules for releasing it vary by contract and by jurisdiction. Always read your specific contract.
On the pay application, retainage is calculated on the total completed and stored to date and then subtracted before arriving at the current payment due. Some contracts retain a flat percentage throughout; others reduce or stop withholding once the job passes a completion threshold. Retainage typically gets released at or near completion, sometimes in stages. Because it accumulates across every pay app, unreleased retainage can become a meaningful receivable on a large job, worth tracking as carefully as the billings themselves.
The summary page is a short waterfall from contract value down to the check you are asking for.
The G702 walks top to bottom in a fixed order:
Every one of these lines derives from the two above it, so a single wrong figure (a mis-added change order, the wrong retainage rate) cascades all the way to the payment due. That is why the arithmetic, not the narrative, is what gets scrutinized.
The practical sequence, from the continuation sheet up to the certificate.
Load your schedule of values onto the G703 as the line items. If change orders have been approved, add or adjust the affected lines so the SOV still sums to the current contract sum to date.
For every SOV line, enter the work completed this period. Carry the previous-applications figure forward from last month, and add any materials presently stored that are not yet installed. The three add up to total completed and stored to date for that line.
For each line, percent complete is total completed and stored divided by scheduled value, and balance to finish is scheduled value minus that total. Sum the columns down the sheet. The totals row of the G703 is what feeds the summary.
Bring the total completed and stored to date up to the summary page. Confirm it matches the G703 total exactly before going further. This is the tie the reviewer checks first.
Calculate retainage on the completed and stored amount at your contract's rate and subtract it to get total earned less retainage. Subtract the sum of all previous certificates. What remains is the current payment due.
Sign the contractor's application block, have it notarized if the contract requires it, and route it for the architect's certification. Submit by the contract's billing cut-off date. A pay app that misses the cutoff typically waits a full cycle for payment.
The mistakes that cost you a payment cycle: most are arithmetic, not judgment.
The total completed and stored on the summary must equal the sum of that column on the continuation sheet. A mismatch is the single most common reason a reviewer sends it back.
Applying the wrong percentage, retaining on the wrong base, or forgetting a contract's retainage reduction at a completion milestone throws off the payment due and invites a correction request.
Billing a line past 100% complete, or ahead of the work actually in place, is the fastest way to lose an architect's certification, and it can look like front-loading, which reviewers scrutinize hard.
If approved change orders are not reflected in the contract sum to date and on the affected SOV lines, your totals will not reconcile and the balance to finish will be wrong.
Many contracts require the application to be notarized. An un-notarized or unsigned pay app is incomplete and does not start the payment clock.
Pay applications are due on a fixed monthly date. Miss it and, more often than not, the whole amount waits until the next cycle, a cash-flow hit that has nothing to do with the quality of the work.
Filling out a G702 and G703 by hand, in a spreadsheet, on every job every month, is exactly the kind of repetitive arithmetic that drifts. The completion percentages get keyed twice, a change order updates the contract column but not the SOV line, the retainage formula copies down wrong, and the reviewer catches it before you do.
The reliable way to bill is to generate the pay application straight from your schedule of values, so the G703 rolls into the G702 automatically, retainage is applied consistently, approved change orders flow into the revised contract, and the AR invoice drafts itself. That is what AIA progress billing software does, and because those same billings feed your WIP schedule, your billed-to-date and your earned revenue stay reconciled instead of living in two disconnected spreadsheets.
See how SitewideOps turns your SOV into pay applications with retainage, change orders, and a drafted AR invoice. No spreadsheet arithmetic to reconcile.