What is a Payment Application?
Payment applications are detailed requests for payment. Rather than one singular document, like an invoice, a payment application is a bundle of documents.
The documents included in a payment application serve as a review of the project’s status and justify the applicant’s request for payment.
Payment applications must be certified (sworn) as true by the party submitting the application. This is so the recipient of a payment application can be confident in the information included.
Who needs to use a Payment Application?
Construction businesses that furnish labor or materials regularly use pay apps.
Payment applications aren’t legally required documents. Instead, the need for a payment application is determined by your customer. They use them to know what work has been performed and the breakdown of costs, so they can confidently release payments.
In what circumstances is a Payment Application normally used?
Pay applications are used whenever the party making payment wants to ensure that payment has been earned. Therefore, construction projects of all sizes use pay applications. (Larger projects just usually require a more detailed payment application than smaller projects.)
As far as exactly when payment applications are exchanged – they are submitted any time payment is requested.
The specific timeframe is determined by the contract terms and payment schedule. Most often, they are submitted monthly. However, some customers require them on predetermined milestones, such as at a certain percentage of completion.
Does a Payment Application change according to project location?
Every construction business has its own policy on payment applications. That means payment applications can vary a lot from job to job – regardless of the location.
Does a Payment Application change according to project type?
It could. Payment applications can vary a lot from job to job, regardless of project type. However, some public projects may require extra documentation not relevant on private jobs.
For example, a public project may require a Certified Payroll Report in the pay app due to prevailing wages.
What happens if I make a mistake with a Payment Application? What if I don’t send a Payment Application?
On private projects, an error in the payment application typically results in the application being denied. The application then needs to be corrected and resubmitted, resulting in a longer wait for payment.
Additionally, if the error results in overcharging it can sour the relationship with the client, affect the business’s reputation, and even result in a legal dispute.
For public projects, the stakes are raised a bit more. If a mistake is made or an error is otherwise present in a payment application, a construction business could run afoul of the False Claims Act (for federal projects) or similar legislation at the state level. If that happens, serious penalties and even treble (triple!) damages could be in play.
Is a Payment Application usually paired with anything else?
A payment application is typically a bundle of documents rather than one, standalone document. There’s one singular form that serves as the actual application for payment, but it’s ineffective by itself.
Typically, payment applications are bundled with:
If any of these documents are incorrect or incomplete, payment may be held until the issue is corrected.