What is an application for payment in construction?
An application for payment is a contractor's claim for the value of work done to date, made at each payment cycle in the contract.
An application for payment is a contractor's or subcontractor's claim for the money it says it's owed at a set point in a construction contract. It shows the value of work done to date, less retention and previous payments, and how that figure was reached. On most contracts it's made monthly and starts each payment cycle.
Applications for payment come up every month on a live contract, in both directions. A main contractor applies to its client and receives applications from its own subcontractors, so the same business writes them and assesses them at once. Good construction accounting software holds client applications, variations and subcontractor billing in one place against each contract.
What goes into an application for payment?
An application for payment sets out the sum the contractor says is due and how it worked that sum out. A typical application includes:
- The gross value of work done to date, measured against the contract sum or bill of quantities
- Agreed variations, and variations still waiting to be agreed
- Materials on or off site, where the contract allows them to be claimed
- Deductions for retention and for everything already paid
- The net amount now due
How does an application for payment work?
The application starts a payment cycle that the contract, and the Construction Act behind it, sets out step by step:
- Apply. The contractor submits its application by the date the contract sets, usually monthly.
- Assess. The client's QS or contract administrator values the work and decides what they think is due.
- Payment notice. The payer, or someone named in the contract, gives notice of the sum it considers due and how it was calculated, no later than five days after the payment due date (Housing Grants, Construction and Regeneration Act, 1996).
- Pay or pay less. The payer pays by the final date for payment. Paying less than the notified sum needs a valid pay less notice, given in time.
What happens if the payer doesn't issue a payment notice?
If the payer misses its payment notice, a valid application for payment can take its place. Where the contract lets the payee notify the sum due before the payer's notice deadline, and the payee does so properly, that application counts as the payee's notice of the sum due (Housing Grants, Construction and Regeneration Act, 1996).
That protection depends on the application itself. One that's late or missing the basis of calculation loses it, which is why the detail on an application matters as much as the total.
Is an application for payment the same as a valuation or an invoice?
An application for payment is the contractor's claim. A valuation is the assessment of what the work is actually worth, and the certificate or payment notice records the sum the payer accepts. The invoice usually comes last, raised for the certified or notified amount so it can be paid and posted to the ledger.
Why do applications for payment matter for cash flow?
Every application is a cash flow event. Apply late, or with figures the client's QS can't follow, and the payment slides into the next cycle.
The other direction carries risk too. A main contractor that can't assess incoming subcontractor applications quickly can miss its own notice deadlines, and then the subcontractor's figure stands. That's why finance teams track receivables and forward cash alongside margin on every contract.
How does Eque2 handle applications for payment?
Eque2 runs client billing as one connected workflow from application to invoice. In Construct, applications for payment, sales invoices, retentions and outstanding payments are tracked against live contracts, so finance knows what's been claimed and what's still owed. Subcontractor applications sit on each subcontractor account alongside part payments and CIS.
For larger contractors, Evision puts applications for payment, valuations, variations and forecasting in the same commercial view as the CVR on Microsoft Dynamics 365 Business Central.
FAQs: applications for payment
How often do you submit an application for payment?
Most construction contracts set monthly applications on a date fixed in the contract. Others use stage payments, where an application follows each completed stage of work. If a contract doesn't set compliant payment terms, the Scheme for Construction Contracts fills the gap and sets them instead (Housing Grants, Construction and Regeneration Act, 1996).
What is a payment notice?
A payment notice states the sum the payer considers due at the payment due date and the basis on which it was calculated. Every construction contract must require one no later than five days after the payment due date (Housing Grants, Construction and Regeneration Act, 1996). If the payer gives no notice, a valid application can stand in its place.
Can a main contractor delay paying a subcontractor until it gets paid?
No. A clause making payment to a subcontractor conditional on the main contractor being paid by someone else is ineffective, unless that other party is insolvent (Housing Grants, Construction and Regeneration Act, 1996). The subcontractor's application follows the payment terms of its own subcontract, whatever is happening further up the chain.
About Eque2
Eque2 is the commercial and finance platform for construction, trusted by over 3,000 construction businesses. Construct brings job costing and contract management to the Sage or Xero accounts a contractor already runs. Evision runs construction commercial and finance management for larger contractors and housebuilders on Microsoft Dynamics 365 Business Central.
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