How to Bill Retainage on an AIA G702 and G703

Retainage is the part of every AIA pay application that contractors get wrong most often, and it is the part owners and lenders scrutinize hardest. It is the percentage of each progress payment, usually 5 or 10 percent, that the owner holds back until the job is substantially complete. Get the retainage math wrong on the G702 cover sheet or the G703 continuation sheet and the architect sends the whole draw back, which delays payment by weeks. This guide explains exactly how to bill retainage on both forms, how the columns tie together, how to handle stored materials, and how to release retainage at the end of the job. If you are on the receiving end, a general contractor, owner, or construction lender processing dozens of these a month, you can pull the retainage and line items off each application automatically with our AIA pay application OCR instead of re-keying the schedule of values.

What is retainage on an AIA pay application?

Retainage is a fixed percentage of the earned contract value that the owner withholds from each payment until the work is finished, typically 5 or 10 percent. On an AIA G702 and G703, it protects the owner by keeping money in reserve so the contractor has an incentive to complete punch-list items and so funds remain to fix defects. The held amount accumulates over the life of the job and is released, in whole or in part, at substantial completion.

The retainage rate is set in the contract, not on the form. Many commercial contracts hold 10 percent through the early phases and then drop to 5 percent, or stop withholding entirely, once the project passes 50 percent completion. Read your contract before you bill so the percentage on the application matches what was agreed.

How do you bill retainage on an AIA G703?

You bill retainage on the G703 in column G, the retainage column, line by line against your schedule of values. For each line item, multiply the work completed and stored to date (column G on the standard G703 layout, the sum of columns D, E, and F) by your retainage percentage, then enter the result in the retainage column. The total of that column is what carries up to the G702 cover sheet.

Walk it through with a single line. Say a line item has a scheduled value of 100,000 dollars and you have completed 40 percent this period plus prior, so 40,000 dollars of work completed and stored to date. At 10 percent retainage, you hold 4,000 dollars on that line. Do this for every line, sum the retainage column, and that total becomes the retainage figure on the G702. Many G703 forms split retainage into two sub-columns, one for completed work and one for stored materials, so the rate can differ between them if the contract allows it.

How do you bill retainage on an AIA G702?

On the G702 cover sheet, retainage lives in Line 5, Total Retainage. You add up the retainage from the G703 and enter it there, usually broken into Line 5a for completed work and Line 5b for stored materials. Line 5 is then subtracted from the total completed and stored to date (Line 4) to produce the total earned less retainage (Line 6). The current payment due flows from there.

The key check is that Line 5 on the G702 equals the retainage column total on the G703 to the penny. If they disagree, the architect cannot certify the application. The G702 also carries the math forward: Line 6 (earned less retainage) minus prior certificates for payment (Line 7) gives the current payment due (Line 8). Retainage is the hinge the whole cover sheet swings on, so it has to reconcile both up from the G703 and down through the payment calculation.

How do you bill stored materials with retainage on the G703?

Stored materials go in column E of the G703, materials presently stored that are not yet incorporated into the work, and they are subject to retainage just like completed work. You bill for materials you have purchased and stored on or off site but have not yet installed, then apply the same retainage percentage to that stored value unless the contract sets a different rate for it. The owner usually requires proof: paid invoices, bills of sale, and evidence the materials are insured and properly stored.

When stored materials are later installed, you move that value from column E (stored) to column D (work completed) in a following period. The dollars shift columns but the total completed and stored to date does not jump, which keeps retainage consistent. Billing stored materials lets a contractor recover cash for big-ticket purchases like switchgear or steel before installation, while the owner still holds retainage against them.

How do you calculate the retainage amount?

Multiply the work completed and stored to date by the retainage percentage from your contract. If you have earned 250,000 dollars to date and the contract holds 10 percent, your accumulated retainage is 25,000 dollars. The current period retainage is the difference between this period's accumulated retainage and the prior period's, so each application only adds the new withholding rather than re-billing the whole amount.

A common mistake is calculating retainage on the current period's work alone instead of the cumulative completed-and-stored total. AIA forms are cumulative by design: every column is to date, and the current payment is what falls out after subtracting prior certificates. Calculate retainage on the running total and let the form back out the prior amounts, and the numbers will reconcile every time.

How do you reduce retainage partway through a job?

You reduce retainage when the contract allows a step-down, often at 50 percent completion, by lowering the percentage applied to new work while leaving the previously withheld amount in place. For example, a contract might hold 10 percent up to the halfway point and 5 percent after. You do not retroactively release the earlier 10 percent; you apply the lower rate to subsequent billings, so the accumulated retainage grows more slowly from that point forward.

Some owners agree to release a portion of accumulated retainage at the step-down rather than just lowering the rate going forward. That release shows up as a reduction in Line 5 on a later G702, which increases the current payment due for that period. Whatever the arrangement, document it, because a change in retainage that the architect did not expect is one of the fastest ways to get an application rejected.

How do you release retainage at the end of the job?

You release retainage by submitting a final pay application that reduces Line 5 retainage to zero, which makes the remaining held amount payable as the final payment. This typically happens at substantial completion or final completion, after the punch list is closed and the owner has accepted the work. The final G702 shows the full contract sum completed, no retainage withheld, and the balance due equal to everything previously held back.

Owners usually require lien waivers, warranties, and closeout documents before they release retainage, so the final draw is as much a paperwork exercise as a billing one. Final retainage release is the single largest payment on many jobs, which is why getting the retainage tracking right on every interim application matters. If the running totals were accurate all along, the release reconciles cleanly. If they drifted, the closeout turns into a reconciliation fight. For contractors who also have to collect signed waivers before that final check is cut, an online document signing tool keeps the closeout package moving.

Processing AIA pay applications you receive

If you are the general contractor, owner, or lender on the receiving end, every subcontractor pay application arrives as a G702 and G703 pair with its own retainage math to verify. Checking that Line 5 on each G702 ties to the retainage column on its G703, period after period, across dozens of subs, is exactly the kind of manual reconciliation that eats an accounts payable team alive. Our AIA pay application OCR reads each form, pulls the schedule of values, the completed-to-date amounts, and the retainage by line, and returns structured data you can drop into Excel or your accounting system. The deeper distinction between the two forms is covered in the difference between an AIA G702 and G703, and the full field-by-field walkthrough is in how to fill out an AIA G702 and G703 pay application.

Once the line items are captured, the rest of the construction payment workflow gets easier too. Teams that route those certified amounts into an accounts payable system to schedule the actual payments often pair extraction with accounts payable automation software, and groups that track committed costs against the original buyout lean on purchase order management software to keep the schedule of values honest. For a broader view of construction document extraction beyond pay applications, see our construction document processing software.

Common retainage billing mistakes to avoid

The errors that get AIA applications rejected are almost always retainage related. Billing retainage on the current period only instead of the cumulative to-date total throws off the running balance. Forgetting to apply retainage to stored materials, or applying the wrong rate to them, breaks the Line 5a and 5b split. Changing the retainage percentage without a documented contract basis surprises the architect. And the classic: the retainage total on the G702 not matching the G703 column to the penny.

Build the application from the G703 up, calculate retainage on the cumulative completed-and-stored figure, keep stored materials in their own column with their own retainage, and reconcile Line 5 against the continuation sheet before you submit. Do that on every draw and the final retainage release will tie out without a fight. Updated June 2026.