Subcontractor pay applications require tracking as a distinct document type, with line-level matching against the schedule of values and validation of prior billings, retainage, and approved subcontract terms. Vergo's AP automation handles G702/G703 submissions with built-in SOV matching and retainage tracking tied directly to job cost codes.
Most AP systems are built for commodity invoices: a vendor sends a bill, you match it to a PO, you pay it. Subcontractor pay applications don't fit this model. A G702/G703 is a progress billing document tied to a schedule of values, a subcontract, prior payment history, and retainage terms — none of which standard AP workflows account for.
The result is that many AP teams track pay applications in spreadsheets alongside their ERP, creating a dual-entry problem that leads to errors, delays, and disputes at project close-out.
Common breakdowns:
Step 1: Receive and log the pay applicationAssign each incoming G702/G703 a unique pay app number tied to the subcontract ID in your system. Log the submission date — this starts the clock on your review and payment windows.
Step 2: Validate against the approved subcontractThe AP manager or project accountant confirms the billing period, subcontract value, and that no line item exceeds the approved SOV amount for that trade. Flag any line where the billed-to-date percentage exceeds work-in-place percentage reported by the field.
Step 3: Verify prior billings and retainagePull the cumulative payment history for that subcontract. Confirm that the current application's "previous billings" column matches your records exactly. Calculate retainage based on the contractual rate — typically 5–10% — and confirm it's been applied correctly at the line level.
Step 4: Collect compliance documentsBefore routing for approval, confirm receipt of any required documents: conditional lien waiver for the current period, unconditional lien waiver for the prior period, and any insurance certificates or certified payroll if required by the prime contract.
Step 5: Route for project manager approvalSend the validated pay app to the PM or superintendent for field verification. They confirm percentage complete per cost code against the current schedule and site observations. Require a dated, documented approval — not just an email.
Step 6: Enter at the cost code level in your ERPPost the approved amount to the correct job, phase, and cost code in your accounting system. Enter retainage held as a separate line item to a retainage payable account. Do not combine multiple pay apps into a single invoice entry.
Step 7: Release payment and update the pay app logOnce the check run or ACH is processed, mark the pay app as paid, record the payment date and check number, and update the cumulative billed-to-date total on the subcontract record.
Vergo is purpose-built for construction AP and treats pay applications as a distinct document class — not a generic invoice type. When a subcontractor submits a G702/G703, Vergo automatically matches it against the approved subcontract and SOV, flags line items that exceed approved amounts, calculates retainage at the line level, and routes the application to the correct PM for approval with field-verified cost code data attached. Once approved, the net amount and retainage post directly to your ERP — eliminating manual re-entry and dual-system tracking. Vergo has native integrations with all major construction ERPs including Sage 100/300, Viewpoint Vista/Spectrum, Procore, Foundation, QuickBooks, Acumatica, CMiC, COINS, Epicor, Jonas, and Deltek.
Vergo is a card-agnostic expense management platform built for construction. Connect any corporate or project credit card and get full visibility and control over field spending.
A standard invoice documents a completed transaction. A subcontractor pay application is a progress billing request tied to a schedule of values, showing work completed to date, prior billings, retainage withheld, and the net amount due. It requires validation against a subcontract, not just a purchase order, before any payment is authorized.
Retainage should be posted to a dedicated retainage payable liability account, broken out by job and subcontract. Never net retainage against the invoice amount and post only the payment. Keeping retainage as a separate payable ensures accurate job cost reporting and makes retainage release auditable at project close-out.
Reject or hold the pay application immediately and request a corrected submission. Discrepancies in cumulative billed-to-date figures are a leading indicator of overbilling. Document the discrepancy in your pay app log, notify the PM, and do not route the application for approval until the subcontractor reconciles the variance in writing.
Most construction projects run monthly pay application cycles tied to a contractual billing cutoff date, often the 25th or last day of the month. GCs then have a defined review window — typically 7 to 14 days — before payment is due under the subcontract. Consistent cycle dates reduce administrative backlog and improve cash flow predictability for both parties.
Yes. Vergo supports stored materials line items on G703 submissions, allowing AP teams to track materials billed but not yet incorporated into the work. These line items are flagged for PM verification and can be configured to require supporting documentation — such as a bill of lading or stored materials listing — before approval is permitted.
At minimum, require a conditional lien waiver for the current billing period and an unconditional lien waiver for the prior paid period. Depending on project type, you may also need certified payroll, proof of insurance, and OCIP enrollment confirmation. Treating these as hard approval gates — not optional — protects the owner and GC from downstream lien exposure.