You know all too well that getting paid on construction projects takes a long time. Subcontractors wait 90 days on average to get paid, with one-third of payments arriving late. Those late payments cost the construction industry $208 billion in 2022, a 53% increase from the previous year.
The damage doesn’t stop at lost revenue. Payment delays disrupt project timelines, cause work stoppages, and result in countless hours spent pursuing overdue payments. This significantly devalues your work, as each day a payment is late, inflation chips away at its worth, effectively reducing your earnings. All the while, you’re still responsible for covering essential expenses like payroll and materials.
Put simply—the longer it takes you to get paid, the less that money is worth by the time you receive it.
It’s time for subcontractors to double down on smart billing practices proven to help avoid payment delays. This article covers 11 of the top AIA billing strategies you can use to ensure fast payment times and prevent the costly consequences that arise from slow payments.
AIA Billing Basics
AIA billing is the closest that construction billing gets to standardization. The American Institute of Architects (AIA) has invested vast resources to develop over 200 construction billing forms, agreed-upon terminology, and standard billing processes.
Ultimately, AIA billing aims to:
- Simplify construction billing
- Reduce billing errors
- Ensure compliance
- Enable timely payment
But it’s not without challenges. The whole process is complicated. Terms favor GCs and project owners. And AIA forms are expensive with unlimited access costs running about $1,600 annually.
This last point drives many GCs to develop their own AIA forms, leading to thousands of slightly different versions of the same form and creating big headaches for subcontractors.
11 Best Practices for Streamlining AIA Billing
Remember, one of the primary goals of AIA billing is to enable timely payments. But you only experience that outcome when you follow the process to a tee. There are many opportunities for things to go wrong. If you use the wrong form, forget a document, or make any other common mistakes that cause payment delays, it can take weeks or months to get your money (even years if we’re talking retention).
Here’s a list of top AIA billing strategies you can follow to make sure pay apps are accepted and payments are processed quickly.
1. Know your contract terms.
One thing that makes AIA billing so complex is that each contract contains several variables. You can eliminate many issues by knowing the exact terms of each project. In addition to establishing scope and budget, contracts define detailed billing and documentation terms you must follow to get paid.
Start by scrutinizing each contract and clearly documenting its guidelines in an easily accessible place.
2. Make sure you’re using the right payment form.
With thousands of slightly different versions of the AIA billing form floating around, it’s all too easy to use the wrong one. Filing an incorrect pay app form means starting the billing cycle over again and results in significant payment delays.
Keep a careful record of which forms to complete for which projects. Getting it right the first time ensures a smoother submission process.
3. Refine your approach to change orders.
Change orders are among the biggest culprits of invoicing discrepancies. We recommend investing some extra attention into creating airtight change order processes.
In short, any change to the project scope—no matter how small—should be documented in writing, thoroughly communicated, and approved by all required parties. That way, when your progress invoice is for a higher amount than the contract originally specified, the client won’t kick it back.
Check out this comprehensive guide for a more detailed discussion on change order management.
4. Never miss a deadline.
We’ve all heard the phrase “better late than never” but submitting a payment application outside of a deadline could mean you miss the entire billing cycle.
Every GC’s billing cycle is different. The more active projects you have, the harder these dates are to manage. You need a calendar and notification system to track and alert you of upcoming filing dates so you can collect, complete, and submit all necessary AIA billing documents within the given timeframe.
5. File pay apps through the right channels.
Once upon a time, subs had to submit invoices via mail. Then came all the fax lines, email addresses, and eventually payment portals. Of course, no two contractors’ (or sometimes even project’s) filing instructions are alike—and sometimes processes change.
We’ve heard it time and time again. A subcontractor emailed a pay app to a GC they’ve worked with before, not realizing that their accounts payable (A/P) team implemented a payment portal (think Procore, Textura, or GCPay) 60 days ago. By the time they found out, the filing deadline had passed, and they had to wait for the next billing cycle.
To avoid this, confirm submission instructions for each project. We also recommend paying close attention anytime you receive communications from your GC’s accounting teams. It could be a notice informing you that they’re implementing a payment portal or switching systems.
6. Keep compliance documentation up to date.
GCs require you to provide compliance documentation along with your AIA billing forms. They may ask for copies of specific licenses, certificates of insurance (COIs), and proof of safety and environmental regulations adherence.
Be sure to keep your compliance documentation up to date. The last thing you want is for an expired insurance certificate to prevent you from getting paid.
7. Know if you need a notary.
Notarization isn’t a legal mandate to collect payments in construction, but many GCs require it. Failure to notarize your payment application or lien waivers is certain to cause problems.
Determine if any of your clients require it and how firm those requirements are. If notarization is required for certain billing forms, consider adding notarization to your AIA billing checklist and a registered notary to your accounting office.
8. Proactively provide evidence of work.
Many GCs, especially those overseeing remote projects, want visual evidence of work completed—often called “backup.” However, this requirement often gets overlooked and, therefore, addressed reactively.
Rather than waiting for them to ask for backup, make it part of your process to include photo or video evidence of major project milestones with your payment applications. This should also cover any stored backup materials. That way, there are no discrepancies, and the GC can see exactly what work was done on a site, issuing payments faster.
9. Improve collaboration between the field and the back office.
There is often a disconnect between the accounting office and the field. Project managers (PMs) might be laser-focused on hitting deadlines and budgets while finance teams are juggling invoicing, payroll, and compliance. However, maintaining a healthy cash flow requires bridging this gap.
Foster seamless collaboration and communication between finance and project teams—from procurement to payment. Implementing best practices like training your PMs in cash flow management and collections, and establishing a clear A/R escalation process, can go a long way toward creating improved cash flow.
10. Automate payment applications and lien waivers.
Between billing forms, lien waiver requirements, payment schedules, and submission instructions, there’s a lot to keep track of. Wouldn’t it be great if you had a system that could manage all the variables involved with each project?
One of the smartest strategies for subcontractors is to implement AIA billing software. Tools like Siteline streamline the entire billing workflow by generating payment applications according to each GC’s specifications, automating lien waiver management, tracking change orders, and providing real-time visibility into A/R.
11. Take your financial forecast into your own hands.
Late payments place a huge strain on subcontractors, with many having to dip into credit lines just to stay afloat. This, in turn, makes it more difficult to accept new contracts, order materials, and invest in growing their companies.
Clear financial reports help eliminate the cash flow challenges that sink many subcontractors. From accounts receivable reporting to cash flow forecasting, data-driven insights can improve your billing and collections processes, and take hold of your sub’s financial forecast.
Get Paid Faster with Construction Billing Software
You can automate many of these strategies with construction billing software. Accounting teams at specialty trade contractors use Siteline to streamline the billing process, ensure accurate pay applications (minimizing delays), and ultimately get paid faster.
Ready to accelerate your payments? See how Siteline can help subcontractors like you get paid three weeks faster. Schedule a demo today.
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