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How to Fix the Application for Payment Process

Processing Applications For Payment, or pay apps, should be easy. Subcontractors complete work as assigned and submit their pay apps accordingly. So why has this process plagued industry productivity so much over the last few decades?

Fix A Broken Application for Payment Process

There are a few reasons applications for payment have remained complicated. First, each general contractor or developer tends to have their own policies and required documentation for compliance, lien waivers, and retainage. And these policies may vary from job to job or state to state. The result is a convoluted pile of paperwork (physical or digital) that is difficult for subcontractors and general contractor teams to navigate.

Managing the application for payment process is known to be a time-consuming and arduous task, to say the least.

Let’s walk through just a few of the steps in this process that have a tendency to slow down subcontractor payments and run projects off course.

Lost in the Lines

Take the schedule of values, for instance. These are your line items with unit pricing based on hours or quantities. It’s meant to be a simple, itemized list that provides the general contractors an understanding of the work they’ll get billed for.

Unfortunately, there is no standardization of how detailed or broad schedule of values (SOVs) are meant to be. They’re often rejected and rewritten, costing precious time over something that is meant to be straightforward. A lack of standardization in this process means SOVs may differ for each job, creating a headache.


Understand Lien Waivers

Next up, the wonderful world of lien waivers. There are no-lien clauses, lien subordinate clauses, conditional waivers, unconditional waivers, and so on.

There are 12 states that regulate what the lien waiver must say, and 38 states that are a mess of non-standards.

As you know, getting paid or paying a contractor is even more complex.

No matter what kind of lien waiver you have to submit or process, they are typically so full of legal jargon and fine print that it’s impossible to deduce what they even mean. Some people may enjoy reading these (like the people who enjoy reading the Microsoft End Users Licensing Agreement), but we’re guessing they’re few and far between.


Get Paid

Let’s talk about the AIA contractor form, G702 Application, and Certificate for Payment – The form a contractor uses to invoice on the job. It should be pretty easy to complete, right?

Remember that in order to fill these contractor forms out correctly, you must ignore change orders that have been approved but not processed. You must also ignore receivables still outstanding from previous applications. Let the fun begin!

Line 1: Original Contract Sum

The original contract sum is the price the GC has agreed to pay you for the scope of work agreed upon. It includes all accepted changes. This number should not change from your first pay application to the last.

Assume your contract was for $900,000.

Line 2: Net Change by Change Orders

(This one is really fun!)

For Net Change by Change Orders, you add up all of the change orders that have been priced and formally approved by the GC. If the project manager is holding up your change order paperwork, call him regularly before your application for payment is due to ask him to complete his side of the paperwork.

Let’s say the GC and processed and signed $100,000 in change orders.

Line 3: Contract Sum to Date

The Contract Sum to Date is pretty self-explanatory. Simply add lines 1 and 2.

For good measure:

Contract Sum to Date - AIA Form


Line 4: Total Completed and Stored to Date

The Total Completed and Stored to Date value comes from the table on page 2 of the G702 form.

For now, assume you have completed $200,000 of work and have stored $50,000 of materials in approved storage sites. Line 4 = $250,000.

Line 5A: _% of Work Completed

Ok – Percent of Work Completed. In the empty space next to the %, write the current retention percentage.

Typically, it’s 10%.

In the blank next to the dollar sign, you’ll write the dollar value of retention that applies to your completed work. To get that number, turn to page 2 and add together the values from columns D and E. Multiply by 0.1 if retention of 10% or 0.05 if retention is 5%.

Are We Done Yet?

See how we’re getting more complicated now? It’s so easy to make mistakes on this document, and it costs your team hours of valuable time to fix them. There has GOT to be an easier way to do this…

And, there is!

Here’s where GCPay comes in: If you’re looking for an easy-to-use software application that tackles the problems we’ve highlighted above, you’ve found it.

GCPay, application for payment processing software, helps you standardize your SOVs, application for payment processing, lien waivers, and change orders all in one solution.

GCPay sends reminders, catches calculation mistakes and helps you organize the digital mountain of paperwork you may face for each job. Use something that is intuitive for your business and saves you time rather than wasting more of it.


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