Progress billing: AIA pay apps, retainage and getting paid

Progress billing is a way of invoicing a construction or installation job in pieces as the work is completed, rather than sending one bill at the end. You agree on the value of each part of the job up front, then bill periodically (usually monthly) for whatever share of each part is finished. The owner pays each bill, often minus a percentage held back as retainage until the job is done.

For a contractor, it's how you keep cash coming in on a job that runs for months and costs you labor and materials every week. For the owner, it means paying only for work that's in place. This guide walks through how it works in practice: the schedule of values, how percentage of completion turns into an invoice, how AIA progress billing works on the G702 and G703 forms, how retainage is calculated and released, and how to collect each progress payment by card, ACH or payment link. Facts were checked on October 14, 2026.

What is progress billing?

It is billing by stage of completion. Each invoice covers the work completed since the last one, measured against an agreed breakdown of the contract price. On a $500,000 job that is 30% complete by the end of month two, you have billed roughly $150,000 so far, less any retainage.

Progress billing sits between two other common approaches:

Milestone billing and progress billing overlap, and plenty of residential contracts call a milestone schedule "progress payments." The difference is precision. True progress billing measures every line of the job each period, which is why commercial owners, lenders and architects prefer it.

How does progress billing work, step by step?

The mechanics are the same whether you use AIA forms or your own invoice template:

1. Break the contract price into a schedule of values: a list of the job's parts, each with a dollar amount, adding up to the contract sum.
2. Agree in the contract on the billing period, the retainage percentage, when payment is due, and who reviews each bill.
3. At the end of each period, estimate the percentage complete for every line, plus any materials bought and stored for the job.
4. Bill the value completed this period, minus retainage, and show what has been billed and paid before.
5. The architect, owner or lender reviews the bill, may adjust it, and approves an amount.
6. The owner pays the approved amount.
7. At or near completion, the retainage held back across all the bills is released.

Change orders slot into the schedule of values as new lines once they're signed. Bill them the same way as the original work, never as loose extras on the side.

What is a schedule of values?

It is the line-by-line breakdown of the contract sum that every progress bill is measured against. AIA's instructions for its G703 continuation sheet describe the form as breaking the contract sum into portions of the work in accordance with a schedule of values the contractor prepares, as the general conditions require, and they note that AIA doesn't publish a standard schedule of values form (AIA Contract Documents).

A good schedule of values is detailed enough that progress on each line is easy to judge, and honest about value. Front-loading (putting inflated values on early work such as mobilization and demolition) gets cash in sooner, but experienced owners and architects spot it and push back. It also leaves you short later, when the expensive finish work has too little value left on its lines to cover it.

AIA progress billing: how the G702 and G703 work

On jobs that use AIA contract documents, each progress bill is a pay application made of two forms: the G702 Application and Certificate for Payment and the G703 Continuation Sheet. This is what people mean by AIA billing, and the progress payment is the amount the architect certifies on the G702.

The G702 is the form a contractor uses to apply for payment and an architect uses to certify that payment is due. It summarizes the contract sum to date, the work completed and stored, retainage, previous payments, change orders and the current payment due (AIA Contract Documents).

AIA's instructions for the G702 set out the workflow (AIA Contract Documents):

1. The contractor fills in the G703 and carries its totals over to the G702.
2. The contractor signs the G702, has it notarized, and sends both forms to the architect.
3. The architect reviews them and, if they're acceptable, completes the Architect's Certificate for Payment on the G702.
4. If the architect certifies a different amount from the one applied for, the architect initials the changed figures and attaches an explanation.
5. The owner pays the contractor based on the amount the architect certifies.

The G703 column math

The G703 is where the percentage of completion turns into dollars. Per AIA's instructions, column F holds materials presently stored, column G (total completed and stored to date) is D plus E plus F, the percentage complete is G divided by C (the scheduled value), and column H (balance to finish) is C minus G. The retainage column is normally used only where retainage varies by line item, and it can be left blank when a single retainage rate applies to the whole contract (AIA Contract Documents).

AIA also publishes subcontractor versions, the G702S and G703S, which follow the same pattern with the subcontractor applying to the contractor. This guide describes how the forms work; it doesn't reproduce them.

A worked example: one month's pay application

Take a made-up contractor in Phoenix building out a restaurant space. The original contract is $480,000, one signed change order adds $20,000, and the contract holds 10% retainage across the board. This is pay application number 3. All the figures are made up for illustration.

The summary on the G702 then works out the payment due:

• Contract sum to date: $480,000 plus $20,000 = $500,000.
• Total completed and stored to date: $251,250.
• Retainage at 10%: $25,125.
• Earned to date after retainage: $251,250 minus $25,125 = $226,125.
• Already certified on earlier applications: $127,000 minus 10% retainage = $114,300.
• Current payment due: $226,125 minus $114,300 = $111,825.

A quick check: this period's work and stored materials total $124,250, and 90% of that is $111,825. If the architect thinks HVAC is 35% complete rather than 40%, the line drops by $4,500, the certified payment drops by $4,050, and the architect initials the change.

How does retainage work?

Retainage is the part of each progress payment the owner holds back until the job is finished, as security that the contractor completes the work and fixes defects. The percentage, and when it comes down, is set by your contract, and on some jobs by state or federal rules, so check what applies to the work you're bidding.

Federal construction contracts give a useful benchmark. Under the FAR clause on payments under fixed-price construction contracts, the government makes progress payments monthly as the work proceeds, on estimates the contracting officer approves. If satisfactory progress has been made, the contracting officer authorizes payment in full; if it hasn't, the government may retain up to 10% of the payment until progress is satisfactory, and once the work is substantially complete it releases the withheld funds beyond what it considers adequate protection (Acquisition.gov). Where the contract doesn't set a due date for retained amounts, the prompt payment clause makes them due 30 days after the contracting officer approves their release (Acquisition.gov).

Private jobs vary far more, so read the retainage clause before you sign. In the example above, by the time the restaurant job is billed out at $500,000, the owner is holding $50,000. That is often most of your profit on the job, and it arrives last. Three habits keep it from slipping:

• Negotiate a reduction when the job passes the halfway mark, if the owner will agree.
• Track retainage receivable by job, separately from ordinary receivables.
• Put the closeout documents the owner needs (warranties, manuals, lien releases) together before the final walkthrough, not after. Our lien waiver guide covers which waiver to sign for each payment and why an unconditional one waits until the money has cleared.

Progress billing on residential jobs

Homeowner jobs use simpler paperwork but the same idea, and some states regulate it. In California, the down payment on a home improvement contract can't exceed $1,000 or 10% of the contract price, whichever is less (CSLB), and the state licensing board's consumer guide tells homeowners to pay only as work is completed (CSLB).

A residential progress schedule usually ties each payment to a visible stage: demolition done, rough-in inspected, cabinets set, final walkthrough. Our guide to credit card processing for contractors has a worked schedule for a remodel and covers deposit rules and chargeback protection, so we won't repeat them here.

How do you collect each progress payment?

Match the payment method to the size of the draw and who's paying. Commercial owners often pay certified amounts by ACH or check through their payables process. Homeowners often want to pay by card, at least for smaller stages.

Card fees deserve a hard look on big draws. If your card costs ran, say, 2.5% all in (a made-up figure; yours depends on your pricing and card mix), the $111,825 draw above would cost $2,795.63 to accept by card. Some contractors add a surcharge on credit cards. Visa caps a US credit card surcharge at the lesser of your merchant discount rate or 3% and requires 30 days' notice to your acquirer (Visa), and Mastercard's ceiling is the lesser of your average effective merchant discount rate or 4% (Mastercard). A homeowner paying a draw with a debit or prepaid card can't be surcharged under either network's rules. Our surcharging program handles the disclosures if you go that way.

For bank payments, Clearo offers ACH payment processing priced by quote, and Clearo says ACH payments usually fund the next business day. Collecting a debit needs the owner's authorization first, which our ACH authorization form guide covers. For cards, our virtual terminal sends invoices and payment links, and our mobile payments options cover tap to pay and card readers on site. See our page for home services businesses for how these fit a contractor's day.

Common progress billing mistakes

• Front-loading the schedule of values, then running out of billable value before the finish work.
• Billing change orders before they're signed.
• Claiming stored materials without the delivery tickets or invoices to back them up.
• Missing the owner's or architect's submission deadline and waiting a full extra cycle to be paid.
• Forgetting to bill retainage at closeout, or sending it without the closeout documents.
• Taking a six-figure draw by card without checking what it costs.

A contractor in Indianapolis or anywhere else faces the same arithmetic: progress billing only helps cash flow if every bill goes out on time and matches the schedule of values line for line. Our guide on how to send an invoice covers the basics for smaller jobs.

Next step

If you take cards on any of your progress payments, send us a recent merchant statement for a free statement review. We'll show you what each payment is costing and where ACH might fit better. To set up ACH or payment links for your next job, contact us.