How to Create Payment Applications for AIA Billing
This help topic explains how to use the AIA® Billing feature in Total Office Manager from Aptora. This feature allows you to create the American Institute of Architects AIA Payment Applications and print to AIA forms G-702 and G-703. Please note that this feature is a paid addon.
There are many methods to complete AIA Billing in the contracting industry. While each of those methods may vary from one Contractor to another, Total Office Manager has integrated this process to work based on data that is entered into the software.
Many Contractors are used to filling out the AIA Payment Application then entering in an Invoice based on the information contained on the Payment Application. This practice was typically performed because there was not an easy or computerized method to tie everything together. In the world of accounting, before you send an Invoice to a Customer, you must first enter it into your accounting software so that it increases your receivables. The AIA Payment Application is simply a Standardized Invoice which you are requesting payment for the job you are currently working on. Using the Progressive Billing feature in Total Office Manager will make completing the AIA Payment Application easier.
In order to get the most out of the AIA functions in Total Office Manager, you will need to do the following:
- Create a Retention item.
- Create an Estimate.
- Create an Invoice (as many as needed).
- Create AIA Payment Applications (as many as needed).
- Create Final Invoice for Retention (money held back for retainiage).
Here are the Step-By-Step Instructions for AIA Billing and Payment Applications
Create a Retainage Item
- Please dd a new account to your Chart of Accounts. Create an Other Current Asset Account named “Retainage Receivables” (or your choice).
- From the main menu, click Customers | New Invoice Item. You may also click the New Invoice Item icon on the Tool Bar.
- In the Type field, select Other Charge.
- In the Name/Number field, enter “Retainage” or something of your choice.
- In the Description field, enter a description of your choice, such as “Job Retainage”.
- Check the % (Percent) option. For AIA Payment Applications, you must use the % option. You cannot use the $ type.
- Enter the percentage as a negative number. For 10%, please enter “-10”.
- In the Accounting tab | Income Account field, select the Retainage Receivables Account you created.
- In the Accounting tab, locate the field called “This Item is Only Used For” and select “Retainage”.
Create an Estimate
- Enter an Estimate for the job you are currently working on. The information on the Estimate will be used for entries on the Continuation Sheet. If any information changes on the Estimate as you work on the project, you will need to be sure to adjust the Estimate accordingly. When saving the modified Estimate, please be sure to Add Change Orders. Changes to the Estimate will be recorded on the AIA Payment Application in the designated sections for Change Orders.
- Retainage Item: If the terms of the sale (or contract) include Retainage, please add a Sub Total item and then add the Retainage item to this Estimate. Enter the correct percentage rate and verify that the retainage amount is correct. Please enter the percentage as a negative number. For 10%, please enter “-10”.
- Check the Contract Total field (in the header) to make sure that amount is the correct total agreed to price for this estimate.
- Contract Total field on an estimate: The total amount of the estimate before any retainage is subtracted.
- When you are ready to create your first (and subsequent) Payment Applications, create an Invoice from the Estimate for a percentage of the Estimate to be billed. It is understood that the entire Estimate line items may not be invoiced at the same percentage rate.
Create an Invoice
- You can create the Progressive Invoice by opening the Invoice/Sale/Estimate/Credit List under the Customer menu, right-clicking on the Estimate you are ready to invoice and choose the option to Create Invoice. Alternative: From the Estimate, click the Menu button, click Create > Invoice.
- Once the Invoice is created, you can then modify the Amount field. There is a built-in calculator to make it easier. You may also change the percentage that is being billed on a Line Item by Line Item basis under the Total % column located to the far right on the Invoice Items grid.
- Note: It is recommended that you keep your quantities as whole numbers. This will reduce the change of having problems related to calculations.
- Save the Invoice.
Create an AIA Payment Application
- From within the Invoice (Menu option), you will then create the Payment Application. This will populate the Scheduled Values from the Estimate for the items invoiced and also put the invoiced amounts in the This Period column. Go to Menu | Create | AIA Payment Application. The AIA Payment Application form will open.
The Payment Application is Not Tied to the Invoice
Please Note: Changes to this Payment Application will not affect or change the invoice that created it. They are not tied together. Changes to any invoices will not have an affect on this Payment Application, unless you reload the invoice and recalculate. Those options are under the Menu button. The reason we do this to offer you complete flexibility in changing the AIA Payment Application to meet the requirements of the entity you are sending it to.
Explaining the Payment Application in Detail
The “Header” is the area at the top of the form. The information in the header will be populated automatically.
Application Date: The date you want shown on the application (much like an invoice date). Today’s date will be entered. You may change the default value if it is necessary.
Application #: The number for the application (much like an invoice number). The next available number will be entered automatically. You may change the default value if it is necessary.
Customer:Job: The customer that this application was created for. This should almost never be changed.
Vendor: The vendor that this application was created for and sent to. This should almost never be changed.
AIA Add Group Items: When a Group Item type was used on an invoice, you have the option of copying over the items within that group or just the header of that Group Item. The header will appear as a single item with a single price for all items within that group.
General Info tab
The value of the fields come from other places in the software. You may edit any of the information on this tab if needed. This tab was designed to look like the paper version of an AIA Payment Application.
Summary of Work tab
The values that you see on this form come from the estimate and/or invoice. Some fields can be edited. You must be very careful about changing any of this information. If the values are incorrect, you should go back and edit the estimate and the invoices created by that estimate, as needed. After any updates to the invoice, the invoice can be reloaded into the Payment Application by clicking Menu > Reload Invoice.
- Line 1: Contract Amount is the total that is found on the Estimate. This is filled in automatically. You may edit this field if needed, but that action will have no affect on the estimate.
- Line 2: Sum of Change Orders is the total amount of Change Orders that were entered for the original Estimate. This is filled in automatically. You may edit this field if needed, but that action will have no effect on the estimate.
- Line 3: Line 1 + Line 2
- Line 4: Total Completed and Stored is the total amount of the Invoice that was billed from the Estimate. This is filled in automatically. You may edit this field if needed, but that action will have no effect on the estimate or invoice.
- Line 5: Retainage. These values come from the Retainage line item from the invoice. If this does not appear to be working, please be sure you have selected the Retention option in that item (In the Accounting tab, locate the field called “This Item is Only Used For” and select “Retention”).
- Line 6: Total Completed and Stored Less Retainage: What you’ve earned, as far as approved Change Orders are concerned, is on Line 4. What the client is allowed to retain is on Line 5. Subtract the Total Retainage from your earned revenue and enter the difference on Line 6.
- Line 7: Less Previous Payment Applications: This is line 6 from your last Payment Application (the last one you sent). Confusion is caused by GCs and Owners who take so long to pay that you are submitting your next Payment Application before the previous one gets paid. Many people write down payments received to date on Line 7 and ignore pay requests being processed. Don’t do that! This Payment Application doesn’t care whether you’ve been paid. It only cares whether you’ve earned additional payment(s). Go back to your immediately preceding Payment Application and write down the value from Line 6 Total Earned Less Retainage on that application. Remember, only the very last Payment Application is considered.
- Line 8: Payment Due: Take your Line 7 value and subtract it from your Line 6 value. Write down the difference on Line 8. This represents the value you should be paid for work earned during this pay period and any change in retainage during the pay period.
- Line 9: Balance to Completion: Take the contract sum to date from Line 3 and subtract the Total Earned Less Retainage from Line 6. This tells the GC that he is contracted to pay you an additional amount after paying this application.
- Please Note: This can be a confusing line because it acts as if all Change Orders have been formally processed and that all previous Payment Applications have been paid in full.
- Summary of Change Orders: This is a table at the bottom of the form. It includes Change Orders that add money to your contract separated from those that subtract money from your contract. The Net Changes by Change Order should be exactly equal to the value you entered on Line 2.
The rest of the fields contains terms, conditions, and other elements that are automatically populated but can be changed as needed. Any changes you make here will be saved to this application only.
- Column A: For reference. You can add a line number if you wish.
- Column B: A description of the item. This comes from the invoice and can be edited.
- Column C: The amounts that were entered on the original Estimate.
- Column D: The Total of Work Completed from the Previous Applications amounts in Columns D & E from those previous applications. This is the total dollar amount you requested for this line item through your last Payment Application. That includes materials that you previously listed as Stored Materials but have now put in place (IE: Installed). Column D does not include work completed for this period nor does it include newly stored material.
- Column E: The amounts that were progressively billed for the work that is completed.
- Column F: The value of Materials Presently Stored on the Job Site for which you are seeking payment. This is typically referred to as the total value of any materials that are currently stored but not installed. Usually, to get paid for stored materials they have to be on-site or in a bonded, secure storage facility.
- Important Note: The software does not use Column F. It does not have any way of determining if materials are being stored on the job, need to be billed, and are not already included in the current or previous invoices. We include the column in the event that a user wishes to add this information. If they do, the form will not self-adjust. The user must be careful to adjust all other numbers so that the payment application is accurate.
- Column G: The Total of the amounts shown in Columns D, E, & F.
- Column H: This is the difference between Column C and Column G
- Column I: Normally used only for contracts where Variable Retainage Rates are permitted on a line-item basis. It does not need to be completed for contracts that have a consistent rate of retainage held over the entire contract.
Additional Notes About Change Orders
- Although Change Orders could be incorporated by changing the schedule of values each time a Change Order is added to the Project, this is not normally done. Usually, Change Orders are listed separately, either on their own G703 form or at the end of the basic schedule. The amount of the original contract adjusted by Change Orders is to be entered in the appropriate location on the G702 form.
- You may list each Change Order on G703 (Continuation Sheet) as a line item of work, then fill out the G702 (Application and Certificate for Payment) “Change Order Summary” section at the bottom of the page. This will give you a Net Change by Change Orders, which goes in Line 2 above. For a deductive Change Order, simply put a minus sign in front of the value on the G703 and put the value (without a minus sign) in the “Deductions” column on G702.
- To view change orders on an estimate, go to that estimate, click the menu button, and select Change Orders.
Additional Notes About Tax
- You may list tax as part of each line item on G703 or as a separate line item. Either way, the total gets included in the “Total Completed and Stored to Date” (G703 Column G) and then transferred to G702 Line 4. That means it is broken down separately in G703 but not in G702.
- Retainage is calculated on the invoice net amount, before sales tax. Retainage comes out of the invoice amount before sales tax. In the Summary of Work tab, line 5a, the Retainage percent and amount fields do not consider sales tax. If that does not work for your contract, you will need to adjust the percentage rate on 5a.
Advanced Tip Regarding Sales Tax on Retainage Items
Retainage items appear to behave like discounts, but they are different. A discount (which is a negative amount) are normally taxed, so they correctly reduce the amount of tax collected on the entire sale.
The AIA Payment Application will always treat the Retainage item as if you were not taxing it (a Tax Code set to Non-Taxable). This is because the Retainage item serves as a withholding. It does not reduce the total amount of the sale. For that reason, sales tax must be handled differently for Retainage items.
Total Office Manager allows you to pay (remit) sales tax based on when you created the invoice (accrual basis) or when you collected the sales tax (cash basis).
AIA Payment Application Sales Tax Impact Example
Invoice Amount: $5,000.00
Sales Tax: $551.12
Invoice Total: $5,551,12
Retainage at 10%: -$500.00
Current Payment Due: $5,051.12
AIA Trademark Notice
The name The American Institute of Architects and the initials (AIA) are registered trademarks of the American Institute of Architects. Aptora Corporation makes no claim to its trademarks and is in no way affiliated with the American Institute of Architects.