A progress claim starts a chain of paperwork: the claim goes in, it's assessed and a payment certificate (or payment schedule) comes back, an invoice is raised for the amount agreed, retention is held back, and the payment is received and matched. Later, defects and non-conformance reports decide when the retention comes back. Each step uses figures from a different place: the contract value from estimating, progress and variations from the job system, invoices and retention balances from the accounts. Progress claim software can help with one or two steps, but most of the errors happen in the handovers between them.
This post follows one claim through that chain and shows where the paperwork breaks. It's a plain-English guide to the workflow, not legal advice. Deadlines and terms depend on your contract and your state's security of payment law. For those, see our guide to progress claims, payment schedules and retention, and check your contracts with a construction lawyer.
The progress claim to payment certificate workflow, step by step
1. The contract sets the baseline
The contract sum, the schedule of rates or breakdown of the price, the retention terms and the claim dates all come from the contract and the estimate. If the claim template doesn't use the same breakdown as the estimate, every claim starts with someone re-typing line items.
2. The progress claim
At each claim date, the builder or subcontractor works out what has been done: percentage complete for each line, approved variations, and materials on site if the contract allows them. The claim is sent to the client, head contractor or the client's representative.
3. Assessment and the payment certificate
The person administering the contract assesses the claim and says how much they agree is owed. Under many standard contracts that's a payment certificate (some contracts call it a progress certificate). Under security of payment law, a response that disagrees with the claim generally needs to be a payment schedule with reasons, given within the deadline. Depending on the contract and the state, the certificate may do both jobs. Check how yours works.
4. The tax invoice
Some businesses send a tax invoice with the claim. Others wait for the certificate and invoice the agreed amount. Either can work, but pick one approach and have your accountant confirm the GST treatment, because the claimed and agreed amounts are often different.
5. Retention
A percentage of each payment, or a set amount, is held back as security until practical completion and the end of the defects period. The retention held has to be recorded somewhere: by the builder for each subcontractor, and by the subcontractor for each client. In some states and contract types, retentions held from subcontractors must go into a trust account.
6. Payment and matching
When the money arrives, it's matched to the invoice. The difference between what was claimed, what was in the certificate and what was paid should be explained by the certificate, the retention and any back-charges, and nothing else.
7. Defects, non-conformance and retention release
During the job and after completion, defects and non-conformance reports (NCRs) are raised, assigned and closed out. Open defects can be a reason for withholding money in a payment schedule, and closing them out is often what releases the retention. If NCRs live in a site app or a spreadsheet that the finance team never sees, retention release dates get missed in both directions.
Where the paperwork breaks between estimating, job and accounts systems
The usual setup has three systems that don't talk to each other properly: an estimating system holding the contract breakdown, a job system or spreadsheet holding progress and variations, and the accounting software holding invoices, retention and payments. The same claim gets typed into all three. That's double data entry, and it shows up as:
- Claim line items that don't match the estimate, so nobody can see claimed-to-date against contract value line by line.
- Variations claimed before they're approved, or approved and never claimed. Our post on the variation to progress claim workflow walks through this.
- Certificates filed as PDFs with the agreed amount never entered anywhere, so the gap between claimed and agreed isn't tracked.
- Retention kept in a spreadsheet that doesn't agree with the retention balance in the accounts.
- Back-charges and contra charges against subcontractors agreed by email and never deducted.
- Defects and NCRs closed on site without anyone telling the accounts team that retention can now be claimed.
The result is a project manager and an accounts person spending claim week reconciling three versions of the same job. Our construction industry page covers the wider pattern.
What it looks like when it's joined up
The goal isn't one giant system. It's making each figure exist once and pass along the chain:
- The contract breakdown from the estimate becomes the claim template, so each line is claimed against its own contract value.
- Approved variations appear on the next claim automatically, and unapproved ones don't.
- When the certificate comes back, the agreed amount is entered once, and the invoice, retention and expected payment follow from it.
- Retention held and owed is visible by job and by subcontractor, with release dates and the open defects that affect them.
- Payments received are matched against the certificate, and any shortfall is flagged.
When it's working, the finance manager can open one report on the first of the month and see, for every job, claimed to date, agreed to date, paid to date, retention held and the next release date, and trust that it agrees with the accounts.
Frequently asked questions
What is a payment certificate in construction?
It's the document in which the person administering the contract states how much of a progress claim they agree is owed. Depending on the contract and your state's security of payment law, it may also serve as the payment schedule. Check your contract and get legal advice on how yours works.
What's the difference between a payment certificate and a payment schedule?
A payment certificate comes from the contract. A payment schedule comes from security of payment law and is the formal response to a payment claim, with reasons for paying less than claimed. One document can sometimes do both jobs if it meets the requirements.
Can progress claims be automated?
Much of the paperwork can be. Claims can be built from the contract breakdown and approved variations, agreed amounts entered once, and invoices and retention entries created from them. The assessment and the decisions stay with people.
Do we need construction progress claims software?
Sometimes. If your job system already handles claims well, the gap is usually the connection to the accounting software and the retention register, not the claim itself. Connecting what you already have is often cheaper than replacing it.
How should non-conformance reports link to payments?
Each NCR should be linked to the job and, where relevant, to the subcontractor. Open NCRs can be a reason for withholding in a payment schedule, and closing them out is often the trigger for releasing retention. Finance should be able to see both.
Next step
If claim week means reconciling the same job in three places, book a free initial chat and we'll talk through how your claims, certificates and retentions move today. To get the whole process mapped across your estimating, job and accounts systems first, our $5,000 Process & Systems Audit gives you a written report on what to fix first.