John Kenney, CPRC, CEO, Cotney Consulting
Managing finances is as crucial as the physical work in roofing and construction and learning how to manage AIA Billing is part of the process. It refers to a standardized payment application method for progress payments in construction. Central to this process are two fundamental forms: G-702, Application and Certificate for Payment and G-703, Continuation Sheet. These documents are pivotal in delineating the work completed and streamlining the payment process between subcontractors, general contractors (GCs) and project owners. This system facilitates clarity and ensures that all parties are on the same page regarding payment stages.
Adopting AIA billing practices in construction comes with numerous benefits. These forms, developed through the collective inputs of contractors, engineers, accountants, lawyers and other industry experts, simplify and standardize various aspects of billing. This standardization is vital in reducing billing errors, ensuring compliance with contractual terms and facilitating faster payments. Furthermore, familiarity with AIA billing opens doors to larger projects from major GCs and government entities, significantly expanding business opportunities for roofing contractors.
Despite its myriad advantages, transitioning to AIA billing can be daunting, particularly for those new to the process. The terminology and detailed requirements of AIA forms may initially seem overwhelming. In addition, these forms are designed with a slight bias in favor of project owners, necessitating a careful and thorough review by contractors. However, understanding and navigating these challenges is a crucial step toward harnessing the full benefits of AIA billing.
Completing AIA forms can be a meticulous process that requires attention to detail. Before filling out these forms, gather all relevant information, including the original contract’s details, the schedule of values (SOV), any approved change orders, retainage details and information about stored materials. This preparation ensures that the forms are completed accurately and comprehensively, leaving no room for error or misinterpretation.
The G-702 form acts as a summary document for payment requests and is divided into three main sections: Project Details, Application for Payment and Signatures. Each section requires accurate information from basic contract details to calculation of the requested payment amount.
Similarly, the G-703 form or Continuation Sheet complements the G-702 by detailing individual line items of work and their respective values. This form is divided into Application Information and a Table of Work and Values. Each column in this table, from the work description to the balance to finish, plays a vital role in documenting the progress and value of the work completed. A thorough, accurate understanding of how to complete these sections is fundamental for effective billing.
Once the AIA billing forms are submitted, they undergo a review process by the GC or project owner. This phase may involve approvals, revisions or requests for additional documentation. Understanding this workflow is critical to ensuring a smooth billing process. Roofing contractors should be prepared for potential revisions and have supporting documentation to justify their billing claims. This proactive approach can significantly reduce the turnaround time for payment approvals and foster a sense of trust and reliability with GCs and project owners.
Change orders are an inevitable part of construction projects, including roofing. They can significantly affect the project’s scope, cost and timeline. Managing change orders is crucial because they must be accurately documented and incorporated into the billing process. Understanding how to process change orders through AIA documents ensures that all changes are accounted for, prevents disputes and ensures contractors are compensated for all work performed.
Retainage, a portion of the contract sum withheld until project completion, is a common practice in construction contracts to ensure contractor performance. AIA billing documents include provisions for retainage, allowing for its calculation and management throughout the project. Roofing contractors must know how retainage affects their cash flow and how to negotiate favorable yet fair terms for all parties involved.
Advancements in technology have introduced software solutions specifically designed to simplify the AIA billing process. These tools can automate the creation of G-702 and G-703 forms, track real-time changes and ensure accuracy in billing submissions. Roofing contractors can significantly reduce administrative burdens, minimize errors and improve billing efficiency by adopting such technologies.
Early Engagement: Engage with the general contractor or project owner early on to understand their specific billing requirements and timelines.
Regular Updates: Update the SOV and progress regularly and keep them transparent to avoid surprises or disputes at billing times.
Documentation: Maintain meticulous records of all work performed, change orders and communications related to billing to support your payment applications.
Training: Invest in training for your team to ensure they understand AIA billing processes, software and best practices.
Despite the structured approach of AIA billing, disputes and delays can still occur. Roofing contractors should be prepared to address these challenges in a professional manner. This includes understanding the dispute resolution mechanisms provided within the AIA contract documents and maintaining open lines of communication with all project stakeholders. Knowing when to escalate an issue and how to leverage mediation or arbitration can save relationships and projects.
Mastering the intricacies of AIA billing is not just a financial imperative for roofing contractors; it is a gateway to enhanced opportunities and smoother project collaborations. Embracing AIA billing practices brings about a fundamental change that offers benefits such as reduced errors, compliance assurance, faster payments and access to larger projects. While the transition may seem daunting initially, navigating through the detailed AIA forms and adopting best practices ensures a seamless billing process. As roofing contractors, the rewards of efficiency, credibility and expanded business opportunities await.
John Kenney, CPRC has over 50 years of experience in the roofing industry. He started his career by working as a roofing apprentice at a family business in the Northeast and worked his way up to operating multiple Top 100 Roofing Contractors. As CEO, John is intimately familiar with all aspects of roofing production, estimating and operations. During his tenure in the industry, John ran business units associated with delivering excellent workmanship and unparalleled customer service while ensuring his company’s strong net profits before joining Cotney Consulting Group. If you would like any further information on this or another subject, you can contact John at jkenney@cotneyconsulting.com.
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