Construction invoices come in many forms: lump sum invoices,progress billings, and time and materials. For many years, the standard forprogress billings in the industry has been the AIA G702 and G703 format. Because of the high cost of purchasing the forms, many contractors use Excel spreadsheets to simulate them and still provide the same information. This can be problematic, however, as the required data entry can lead to errors andover billing. And, since the process isn’t automated, delays in invoice submission and review are common.
What if there was a way to get past all the problems with the AIA format? What if construction progress billing could be smarter, better,and easier? The good news is it can. But before we get into that, let’s look at the problem more closely.
How AIA billing forms work
The American Institute of Architects (AIA) has developed standard contract forms and templates that are used by a majority of companies in the construction industry. FormsG702 and G703 are used by contractors to bill portions of their contracts as work progresses on a project and have become a standard in the industry. The forms allow contractors to bill for the portion of a contract that has been completed and show a summary of the contract status and previous amounts billed for quick invoice review and approval.
The two forms are generally submitted together, along with other billing documents that may be required, depending upon the contract terms. The first form, G702, provides a contract summary for the project and provides space for the architect to approve the amount that can be paid to the contractor. The second form, G703, is a line-item breakdown of the contract that provides a summary of the amounts billed and completed to date.
To complete an AIA billing, the contractor must move values around on the G703, enter the amount to be billed with the current invoice foreach line item, then verify that the amounts are correct and the math adds up. If the contractor is doing this in Excel, all the data movement has to be done by hand, which can cause errors. Some software programs provide invoice formats similar to the AIA forms, allowing contractors to take advantage of the software’s ability to complete the data movement and math for them.
Problems with the AIA billing forms
The biggest problem with the AIA billing forms, especially if the contractor is completing them by hand or in Excel, is that there are many opportunities for errors to occur. Numbers can be transposed, formulas may not add up correctly, or data doesn’t get transferred properly from one column to another. All of these potentially can cause problems with the invoice calculations, delaying project payments and impacting the contractors on the project and their vendors down the line.
In addition, incorrect math and data entry errors can cause a contractor to over bill on their contract, requesting more than their contract amount. If a GC or owner isn’t paying careful attention, they could end up overpaying.
Also, discrepancies in contract amounts can occur. Contractors have to ensure that the contract amount is correct, alternates are listed as needed, and the owner gets the information they need the way they want to see it. This requires contractors and subcontractors to communicate with each other about how the subcontractor’s invoice is to be presented and how their contract needs to be broken down.
Contractors may not know how to bill for change orders when using an AIA form. Some GCs let them bill for change orders that aren’t approved, while others only allow billing once the CO form has been executed by everyone involved. Change orders can be listed on the billing form whether they are approved or not, but that doesn’t mean they will get paid. To further confuse things, often the subcontractor’s accounting department doesn’t know when a change order has been approved, so they don’t know they can bill for it.
Collecting the documents necessary to provide backup fora progress invoice can be difficult, as well. Lien releases, payroll reports, and other documents required by the owner or general contractor come from many sources and aren’t usually stored in one location. Ensuring that all the documents are gathered and submitted with the invoice takes time,preparation, and organization.
Then there are some contractors who forget to submit their invoices altogether or submit them after the owner or GC’s due date. This could mean potentially waiting another month for payment for work completed in the current month, causing cash flow difficulties and potential project delays due to a contractor not being able to pay their bills.
Move your invoicing into the 21st-century
There is a way to overcome all the problems with the AIA forms listed above, and it’s called smart invoicing. With smart invoicing systems, like Theo Build, contractors can avoid math errors, ensure they have the correct contract amount, bill for change orders when they are approved,organize their backup documentation, and submit their invoices on time.
Theo Build makes invoicing simpler for construction project teams. It automates the invoicing process and ensures that invoices are complete with all the backup documentation they need. It includes features like:
· Automatically sending reminders to subcontractors to submit an invoice
· Invoice forms that are automatically generated with the correct contract amounts and approved change orders
· Forms that automatically calculate the amount due for the period as per the contract terms, preventing overbilling
· The ability to request and collect backup documents, including lien releases, payroll reports, invoice copies, etc.
· Routing the invoice to the general contractor for approval once the invoice is complete and submitted
· Tracking the invoice approval process, letting subcontractors know when there are issues so they can fix them promptly
· The ability for subcontractors to track when payments have been released and receive their funds quickly
We handle all the headaches caused by the outdated AIA billing process, making the subcontractor invoice process smooth and easy, and ensuring that everyone gets paid promptly.
Theo Build provides general contractors and subcontractors a new way to invoice for their work that is automated, verified,and organized, allowing them to concentrate on their businesses and projects