Construction payment applications are simple, everyday project management tools.
Construction payment applications state the contracted schedule of values, the frequency of submitting monthly work progress, and previously approved payments. They ultimately request the contracting party to accept the work and provide payment.
There are several formats for managing construction payment applications, such as AIA Pay (G-702 and G-703), and there is nothing inherently wrong with the different payment application documents, which are all similar in terms of content.
The biggest difference lies in how the payment applications are progressed. Several project managers still rely on processing payment applications using PDFs, spreadsheets, or Word document files that are filled in by the subcontractor, which is time-consuming and potentially risky.
Manually reviewing and approving construction pay applications is a risky burden.
Construction pay applications consist of the schedule of values, which is simply a list of materials and services signed in the contract, as well as some articles.
For example, let’s say this list contains 15 articles. Each article has 5 columns of information (contracted value, previous payments, current payment, sum of payments, and free amount left in the budget).
This means that there are 75 cells of information to check—and in rapidly progressing construction, it’s common for any construction payment application to consist of ten or more order changes eventually.
A project such as a five-floor office building might easily have several hundred payment applications, all of which must be controlled and approved by the project manager.
The subcontractors have the upper hand
The subcontractors have the upper hand, as these payment applications are issued by the subcontractors, who could easily make an “accidental” error, resulting in wins for them.
It’s a real burden for the project manager, who needs to control all 75 columns of information where data is stored between spreadsheets, accounting tools, and file folders.
This situation can become even more hectic when, due to a lack of time, project managers might have 50 or more payment applications being sent monthly mid-project.
In many cases, the outcome is that the payment applications are poorly controlled and approved, with potentially very costly errors.
Construction Payment Application Software Can Make a Difference
Planyard is a construction payment application and budget management tool that project managers love to use. It helps automate and streamline project payment applications.
#1 The subcontractors access the payment applications online
#2 Standard form for payment application with a clear overview of information
The form is automatically assembled, and each subcontractor has access to the form that corresponds to his/her contracted schedule of values, previous payments, and more.
Submit the % or sum of work done.
#3 Change orders streamlined
When a change order is set, Planyard allows these to be submitted by the subcontractor. When the project manager approves the change order, it will be connected to the budget, contract, and future payment applications.
#4 Easy payment application approval
Have a clear overview of all your incoming payment applications. Ensure the information is correct and that the subcontractor has no access to change the contracted values or previous payments.
#5 Efficient process for all parties
Subcontractors don’t have to update spreadsheets and can enter the amount of work completed. Project managers can review and approve all payment APPs online with a simple one-click action.
When the invoice comes in, you can immediately compare it with your payment application. By clicking ‘approve,’ project managers save much time that would have otherwise been wasted on data entry, and the accounts and expenditures are sent straight to accounting.
Conclusion:
Construction payment applications are standard documents in construction.
While there are many formats for such applications, the structure of the documents is usually the same.
The methods used in setting up a payment application process can make a difference. Processing payment applications on spreadsheets and PDFs is time-consuming for all parties and results in the risk of payment errors.
However, construction billing software such as Planyard helps streamline the process and save stakeholders time.