Construction Accounting
Progress Billing and AIA Forms: How Construction Accounting Software Gets You Paid Faster
Why Construction Billing Is Not “Just Another Invoice”
Unlike standard AR, construction billing is tied to pay applications, schedules of values (SOVs), retainage and lien waivers. Owners and GCs expect you to follow strict formats like AIA G702/G703. If your billing process is manual or inconsistent, you’ll see delayed payments, rejected pay apps and cash flow strain.
Specialized construction accounting software handles progress billing logic, keeps billings in sync with contracts and helps you stay on top of retainage and change orders.
Building and Managing the Schedule of Values
The SOV is the backbone of progress billing. Construction software lets you:
- Create SOVs that align with contract divisions or internal cost codes.
- Allocate contract and change order values to each line.
- Lock the SOV after owner approval to avoid mid-project confusion.
When integrated with job cost, you can compare billed percent complete with cost-based percent complete as a sanity check.
Generating AIA-Style Pay Applications
Instead of manually filling out AIA forms, accounting systems can:
- Pull current SOV balances and prior billings.
- Let PMs and billers enter this-period work completed and stored materials.
- Automatically calculate retainage, new balance and total completed and stored to date.
- Produce AIA-style PDFs or electronic submissions ready for owner review.
Standardized pay apps reduce errors and back-and-forth with project owners.
Handling Retainage Without Losing Track
Retainage is a significant chunk of your profit sitting in someone else’s bank. Construction accounting software tracks:
- Retainage withheld for each pay app and SOV line.
- Retainage receivable by job, customer and project phase.
- Release of retainage when conditions are met (substantial completion, punch list, final closeout).
AR and WIP reports can show how much retained cash is “trapped” by project, helping you focus on closeout tasks that unlock it.
Integrating Subcontractor Billing and Lien Waivers
On the flip side, you’re often the one holding retainage from subs. Your system should:
- Link subcontractor pay apps to your own pay apps.
- Track conditional and unconditional lien waivers associated with payments.
- Ensure you never release funds or waivers out of sequence.
This protects your lien rights and keeps upstream owners comfortable that risk is controlled.
Reconciling Billing, WIP and Cash
Progress billing ties directly into WIP and cash flow. Construction accounting platforms:
- Update billings to date for WIP calculations automatically.
- Feed AR aging reports that highlight slow-paying owners or GCs.
- Support cash forecasting based on upcoming pay apps and expected payment terms.
When billing, WIP and cash projections are connected, you can make smarter decisions about hiring, equipment and new bids.
Final Thoughts
Progress billing in construction is complex, but it doesn’t have to be chaotic. With the right construction accounting software handling SOVs, AIA-style pay apps, retainage and lien waivers, you can get invoices out faster, reduce rejections and keep cash flowing even on large, multi-phase projects.
- Top Expert
Nathan Rowan
Program Research, Editor, Expert in ERP, Cloud, Financial Automation
