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Financial

Billing

In Plain English

The process of submitting invoices to the owner each month for work completed and materials stored.

Definition

In construction, billing refers to the process of submitting periodic payment applications to the owner for work completed and materials stored during the billing period. Contractors submit billings monthly, typically using AIA G702/G703 forms or owner-specified formats, supported by a schedule of values, lien waivers, and certified payroll where required. Timely and accurate billing is critical to maintaining positive cash flow.

Why It Matters in Bidding

Billing accuracy directly governs a contractor's cash position, because the schedule of values created during bidding becomes the line-item basis for every monthly payment application. Owners and lenders scrutinize billings against percent-complete, and errors trigger rejected pay apps that delay funds for weeks. Disciplined billing also preserves lien rights and keeps subcontractor payments flowing.

Example

On a $4.2M school renovation, the GC submitted its June billing on AIA G702/G703 showing 38% complete against the schedule of values, attached conditional lien waivers, and was paid within the contract's 30-day window.

Related Terms

Payment ApplicationProgress BillingSchedule of ValuesLien Waiver

Related Tools & Templates

Aia G702Payment Application Template

Frequently Asked Questions

Each schedule-of-values line is multiplied by its percent complete for the period, stored materials are added, and previously billed amounts are subtracted. Retention, often 5 to 10 percent, is then withheld. The net total becomes the current payment due, summarized on the G702 continuation sheet and certified by the architect.
Owners typically require a schedule of values, lien waivers from the contractor and lower-tier subs, and on public work certified payroll. Some contracts also demand updated progress photos, stored-material invoices, and a revised schedule. Missing any required backup is the most common reason a billing is rejected and payment slips a cycle.
Overbilling means a contractor has invoiced more than the value of work actually performed, borrowing future cash today. Underbilling is the reverse and signals work financed out of pocket. Both distort work-in-progress reports, and persistent overbilling can leave a project unable to fund remaining costs near completion.

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