Payment applications: a live tool for cash generation

If controlling change at the source is about spotting issues and mastering the variation process is about proving them, then don’t make the mistake of falling at the final hurdle by failing to maximise the amount paid to you through the application for payment and payment notice process.

It is frustrating when payment applications are put together in a last-minute, end-of-the-month rush. They need to be a live working tool that you are continuously updating with variations and other information and focusing on the substantiation needed to justify the amounts you are asking to be paid.

This is where you turn events into cash.

Why “live” applications matter

If you can maintain a live payment application, then you will not miss any change, variation or progress issue because it wasn’t ready in time. You need to add events as soon as they are notified so that:

• You avoid the risk of leaving money on the table.
• You reduce disputes by giving the certifier more time to review details.
• You smooth cash flow by keeping claims current and consistent.

Think of your payment application not as an event but as an ongoing process; as soon as you submit and agree to the current month, then immediately create the application for next month.

Day one final account approach

Unless you operate sophisticated tech systems then it is unlikely that variations automatically make it into payment applications. You need to actively include them by identifying them and valuing them contemporaneously; don’t wait until the final account to mop everything up.

You should use a day one final account approach, which should:

• Keep the variation discussion live.
• Improve your chances of being paid on an interim basis.
• Reduce the size and risk of final negotiations.

Evidence-rich applications

The best payment applications are built from the perspective of the certifier: What will they need to approve this amount? Think of this from your perspective, and what, if the payment application was in front of you, would you be looking for to justify the amount in the application for payment?

You might consider including:

• Marked-up drawings showing completed work.
• Progress photos.
• Correspondence confirming instructions.
• Breakdown of labour, plant, and material costs with supporting cost evidence.

By pre-answering the certifier’s questions, you will maximise the payment and cash flow.

Reconciling payment applications with costs

One quick self-check: how much have you spent to date versus how much are you applying to be paid? Can you take this check down from a total project to another level, or another level again, to ensure that you know what you need to be paid?

If your application is insufficient to cover your costs, in whole or in part, then consider:

• If you’ve spent more than you’ve applied for, ask why.
• Is it a timing issue?
• Are you missing recoverable changes?
• Is there an issue with the contract payment structure (e.g. an activity schedule amount is not enough)

This reconciliation is often the early warning that something has slipped through the net and/or there are underlying or emerging issues.

Practical tip box: five ways to make your payment application bullet-proof

1. Update it weekly and don’t wait for month-end.
2. Include every agreed and forecast variation.
3. Attach evidence to every line item.
4. Pre-empt certifier questions with clear justifications.
5. Reconcile with costs before submission.

Final reflections

Payment applications are more than a formality: they are the bridge between the work you’ve done and the money you receive. When they are kept live, detail-rich, and aligned with your cost data, they protect both your cash flow and your revenue recognition.

By combining early change control, disciplined variation management, and proactive payment applications, you can tighten the gap between cost being incurred and cash being paid, strengthen your financial position, and reduce the risk of funding project changes for months on end.

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