How to make a Payment Application in Construction

An application for payment is used in construction projects and outlines exactly how a sub-contractor will be paid, and for what work. A standard application for payment template includes the services provided by the sub-contractor, as well as the materials used for the job.

Most commonly presented in list form, as outlined in the template below, the payment application must include all unit prices and quantities of each item being furnished by the sub-contractor.

What is an application for payment?

An application for payment contains all the information needed to confirm a certain amount of work has been completed. The overall contract will dictate what amounts of work are due payment, and each individual application for payment confirms when a completed amount of work is due for payment.

The application is also a way of controlling which tools and materials have been provided by the property owner or direct contractor. By having this information detailed on each payment application, any room for error is greatly minimised. Applications for payment help track a project’s costs and the balance required for completion of the construction project. They also record all materials received and used to date.

The documentation required for an application for payment can vary depending on each project’s requirements. Most payment applications will include a general form containing all the necessary details as outlined below, as well as a Schedule of Values.

Schedule of Values

A Schedule of Values is the overview of the project and the base from which all payments applications are formed. The Schedule of Values includes the projected cost for each individual aspect of the project.

The costs described on the Schedule of Values will be broken down into smaller increments which detail exactly what an expense is spent on. If a monetary amount has been assigned to cover the cost of building a wall, the Schedule of Values will detail how much of that overall cost has been spent on each item. It will list the cost of the bricks, cement and tools, as well as the labour required to build the wall.

Application for payment template

Every application for payment template should begin with a page containing the name of the project and an overview of the current status of the project. This information is critical and will inform the other parts of the template. The rest of the template should consist of the following information:

• The name of the property owner, direct contractor or architect

• The number of the payment application

• The dates covered by the payment application

• The original amount of the contract

• The total value of all work completed to date

• Any changes to the order or required work

• The current amount due for this payment application

• The total amount of previous payments made

• The total balance remaining

The application for payment template should contain any necessary legal certification from the property owner or direct contractor for the labour and materials.

Calculating retainage on payment applications

The payment application should also record the amount of retainage. This is the agreed-upon portion of the overall price to be withheld until the work is substantially complete.

The retainage is only paid once enough work has been completed so that the property owner or direct contractor is assured that the sub-contractor will satisfy all their obligations. Retainage is usually calculated as a percentage of the work completed so far, and thus may change from one payment application to the next.

We can help

If you’re interested in finding out more about how to make an application for payment, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.