Stored materials on pay applications

Stored materials are materials you have purchased and delivered for a project but not yet installed — membrane on the roof deck waiting for weather, glass fabricated and crated at the shop, switchgear staged in a warehouse. On a G702/G703-style pay application, they are billed in Column F, "Materials Presently Stored," which lets you recover the cash you have spent on major material before the labor to install it happens.

Billing stored materials is a right the contract gives you — or does not. Most commercial contracts allow it for materials suitably stored at the site, require advance approval for offsite storage, and demand documentation either way. For material-heavy trades, negotiating stored-materials billing into the contract is one of the highest-impact cash-flow moves available: on a job where $150,000 of material lands six weeks before installation, that is $150,000 of your money the owner is otherwise sitting on.

On the G703 continuation sheet, each schedule-of-values line carries: work completed from previous applications (D), work completed this period (E), and materials presently stored (F). The total, Column G = D + E + F, is "total completed and stored to date," and drives percent billed and retainage.

The part that trips people up: F is a snapshot, not a running total. It holds only the value of material stored right now. When stored material gets installed, its value moves out of Column F and into Column E as work completed this period. Billed correctly, the move is invisible to the total — G stays whole while the mix shifts from stored to installed. Billed lazily — material installed but still sitting in F — the same dollars appear twice, and the application overstates what you are owed. Owners' reviewers look for exactly that.

A worked example: a glazing contractor has $120,000 of curtain-wall glass fabricated and delivered in March, installation scheduled for May. The March application bills $120,000 in Column F (with whatever retainage rate the contract applies to stored materials). In May, the crew installs it: Column F drops to zero and Column E picks up the $120,000 as work completed — plus the installation labor line earns its own progress. Total completed and stored never double-counts.

Nobody pays for a pile of material on trust. Typical stored-materials requirements, drawn from standard contract terms:

• Paid invoices or bills of sale proving what the material cost and that you (not your supplier) hold title, or that title passes to the owner upon payment.
• Itemized inventory tying the stored value to specific schedule-of-values lines — not a lump sum.
• Insurance covering the stored material against loss, naming the owner where required.
• Suitable storage: onsite, protected from weather and theft; photographs are commonly requested.
• Offsite storage, only with consent: usually a bonded or insured warehouse, segregated and labeled for the project, with the owner's right to inspect. Some owners send a representative to verify before approving the application.

Build the backup package the day the material lands, not the day the application is due — the paid invoice, the photos, the insurance certificate. Applications with clean stored-materials backup get certified; applications without it get cut, and the cut usually costs you a full payment cycle.

Billing stored materials solves cash. It does not earn profit — and this is where pay applications and financial statements part ways.

Under ASC 606 (the revenue recognition standard), material that has been delivered to the job but not yet installed is treated as an uninstalled material when four conditions hold (ASC 606-10-55-189 through 55-191): the material is not a distinct good on its own, the customer obtains control of it well before it is installed, its cost is significant relative to the total expected cost of the job, and the contractor did not design or manufacture it. When those conditions are met, the contractor recognizes revenue for that material only up to its cost, zero margin, and excludes it from the cost-to-cost measure of progress until it is installed. Transferring a crate of membrane to the customer is not the performance the contract is buying. Whether a given delivery qualifies is a judgment your CPA makes on the facts, not a default.

Practically, that means your WIP schedule must carve stored materials out of the percent-complete math: take the uninstalled cost out of both cost-to-date and estimated total cost, compute percent complete on what remains, then add the stored-materials revenue back at cost. Skip the carve and a big material delivery inflates your percent complete overnight — margin appears on the P&L that no crew has earned yet, and it reverses out of a later period when the real installation happens. Auditors, sureties, and CPAs who work construction look for this adjustment by name; on the G703 it is the same dollars sitting in "Materials Presently Stored."

The rule of thumb: stored materials move cash forward, never margin. If your WIP shows margin jumping in the same month a large material buy landed, the schedule is lying to you.

This is a place where the billing document and the accounting have to agree, and it is exactly where spreadsheets drift. SitewideOps treats stored materials as one thread through the whole system: pay applications carry the materials-presently-stored column with its own retainage rate, and the WIP schedule applies the ASC 606 carve automatically — job material that has been billed to the project but not yet issued to a crew is recognized at zero margin, shown as its own "Stored Materials" line with an evidence drawer listing the purchase-order lines behind the figure, because that is the first question an auditor asks.

When the crew draws the material and installs it, the carve releases on its own — the same event that moves Column F into work completed moves the margin into earned. No month-end adjusting entry, no side schedule.