What is The AIA?
The American Institute of Architecture is an organization that provides architects with resources such as education, government advocacy, community redevelopment and public outreach to better the architecture industry.
In addition to this, the organization has created a set of contract documents ranging from Owner/Contractor Agreements to Contract Administration and Project Management Forms. The AIA G702 and G703 documents are the ones specifically tailored to construction payments.
Pertaining to the construction industry, general contractors and project managers, by contract, are often forced to use these documents in the billing process.
Or are they?
It may seem that the AIA billing system is the only option, but the construction industry is starting to go in a different direction. General contractors have sought the need for a billing system that speaks their language, so documents and construction payment software have been created to meet these needs.
What is AIA Billing?
The AIA G-Series is a set of documents that track the billing process for both architects and contractors throughout a project. There are several forms used in the process. A couple of important forms include the G702 and G703 subset documents.
This process is in no means simple, taking time and understanding to complete. Any minor error could result in disapproval from the architect or owner and cause the general contractor to start all over.
There are multiple steps in this process, but here’s a breakdown of the keywords:
This is the first step in the process of AIA billing. The G702 Application essentially is an application in which the architect reviews the contractor’s application for payment for approval.
Imagine this: You pick up a major catering order that you paid in full. You get home, start setting out the food and realize a quarter of your order is missing. You’ve already paid expecting everything to be there and now have to go through a hassle of getting this fixed. The chefs are going to be less motivated to fix this issue as they have already been paid in full.
This is the basis of why retainage exists in construction projects.
To avoid parts of the project not being completed or being done inadequately there is a percentage of the contract, around 5 -10 percent that is not paid out until the project is completed. Typically, a punch list is created so the contractor can check that each detail is completed to standard.
Retainage is essential in creating an incentive for workers to properly complete the tasks at hand.
- Schedule of Values
This is essentially a breakdown of work needed to be done for a project. The schedule of values also has a dollar amount associated with each line item, which is the cost that has been set in the contract.
- Stored Materials
Stored materials are purchased early in the construction project process, but not needed for use just yet. The reason you store materials is to create a smooth and undisturbed project.
Although, there is a risk for damage and theft with stored materials so they often require insurance.
Now, let’s connect the dots…
Once a general contractor fills out the document, the architect reviews it. If the architect does not agree with the documentation, he or she will redline it. Meaning they will make adjustments and return it to the general contractor to be re-completed.
The entire AIA billing process requires high attention to detail; if the general contractor makes a minor mistake in filling out the documentation, it will result in delayed payment and work completed on the project.
These Mistakes are common due to the intricacy and lack of explanation in AIA G702 and G703 forms, and the result of delayed payment can drastically affect your client and subcontractor relations.
Defining the Relationship Between AIA and Construction Companies
This relationship is not one that is necessarily desired, but it works. Think of it as one of those “If we’re both not married at 30” situations. There seems to be no other option, so you go for it.
While this might not seem a problem, there are some kickers in the relationship…
1. The Documents Come With a Cost.
Using G702 and G703 forms can be not so nice on the wallet.
Since they are the AIA’s property, they have the right to charge for every download, and it can add up. For example, to obtain an annual license for access to all AIA documents, it can cost your company over $8,000…for just 10 users. I don’t know about you, but that seems like a pretty penny for some paper.
2. Uneven Distribution Of Control.
That’s right. The AIA has more power than the contractors. Architects are given the upper hand because it is their documentation.
Contractors unknowingly accept the biased language of these documents which reduces the risk for the architect and owner. In turn, most of the liability is given to the contractor.
3. As a Contractor, You Have to Scrutinize the Documents.
These documents are not necessarily contractor-friendly. The terminology between architects and contractors contrasts; since these forms are written in the architect’s voice, the contractor has to be absolutely sure what is written is correct for their project.
A misinterpretation of the forms could result in delayed payment or worse.
4. Bias Exists.
AIA documents have the architect’s interest as the top priority. Therefore, since the architect has the advantage, general contractors do not get the fair end of the stick.
We highly advise general contractors to hire a lawyer to review the AIA billing contract. A lawyer can make sure there is no disadvantage toward any party involved.
This relationship obviously has some rough parts to it, but the premise is…it works.
For general contractors, it takes a level of learning and time to properly fill out these documents. So, if there are other simpler options out there, why not test them out?
What are the Alternate Options?
several construction-based associations, including the Associated General Contractors of America and The American Subcontractors Association, helped develop a set of industry-accepted contracts. These contracts are designed to be fair and speak the language of the construction industry.
For pricing, you have the option to buy access to all 107 documents. You can also choose suggested packages geared towards each profession. For example, there are packages designated for design-builders, subcontractors, and consultants.
2. Construction Payment Software
Think how simple it would be to bypass this treacherous process and have it laid out for you completely online. Well, lucky for you, there is contractor billing software that will assist you every step of the way in the construction payment process.
Construction payment software eliminates unnecessary steps in the payment process, as well as speeds up the overall billing process.
Rather than putting a high amount of focus on billing, construction companies can take that weight off their shoulders with the use of construction invoice software that is highly automated to do it for you without the possibility of human error.
In one completely digitalized space, construction payment management software will assist construction companies throughout the entire billing process.
It is important to note what your company is looking for in a construction payment software. What specific areas of the billing process is slowing me down? How many users would my company need to have on the software? Once you identify key factors such as these, the process will run smoothly.
3. Digitized and Automated G702 and G703 forms.
Many companies, including the AIA, have begun placing primitive versions of automated AIA G702 and G703 forms online to try and combat the issues of human error and the amount of time they take to complete.
These digitized documents are a good start in innovating the way contractors complete their billing, but they have not been perfected. Seen as mere side-projects to hush criticism, not much care has been put into these online versions of G702 and G703 forms and they are often just as confusing. Until now…
Software companies such as Flashtract have perfected the automation of free AIA G702 and G703 forms by making them completely excel based and spoken in your language.
Even better, they are naturally integrated into Flashtract’s construction billing software that streamlines your entire billing process.
The Value in Construction Payment Software
Technology is constantly innovating the construction industry, so why not stand on board to get ahead of the competition? Here are a few advantages of construction payment software…
1. Construction payment software speaks your language.
The software is there to help you, not trick you. They provide a detailed breakdown and answer any additional questions you may have.
Construction payment software companies design the documents to be readable for you. No more “lawyer language” to trip you up and hold you accountable.
This helps reduce mistakes made while filling out the documents and allows you to better communicate with your team and all parties involved during the billing process.
2. Keep everything in one space.
Contractor billing software is designed to help you stay organized. Rather than having to carry around a set of physical documents, all of this information is in one space, at the click of a button.
By having all your documents stored in a cloud-based software, you will always have control of your documents wherever you are. This also allows you to instantly give any party involved asses to the documents when needed.
3. Construction payment software uses software integration.
Many construction payment software companies integrate with other complementary software such as AIA integration. This allows contractors and all players in the billing process to easily review and approve work in one system.
All information can be passed along to your accounting systems or exported onto AIA billing forms. This takes away extra, tedious steps for you and your team allowing more focus elsewhere, because time IS money.
4. You can focus on building, not billing.
After all, that is your profession. With the process being more accessible and simplified, you can take the focus off catching up on billing.
In turn, you will be paid quicker and do not have to worry about taking money from savings to pay your team. Contractor billing software will revolutionize the way you do business.
How Can Flashtract Help?
Flashtract was created to streamline the process of your construction billing. We want your company to focus on building, not billing.
Each year billions are lost due to slow error-filled payments. By digitalizing the process, we can ensure that you will get paid and/or pay your subs on time.
We have accomplished our goal with our innovative new construction billing software that keeps all documents in one place, spoken in your language, compatible with as many softwares as possible.