The rule in one line
A subcontractor can be paid for the original scope plus approved change orders, up to the revised subcontract value, less what has already been billed and less retainage. Pending change orders do not count yet.
What you are matching a subcontractor invoice against
Three records: the subcontract (the original commitment), the approved change orders that adjust it, and the billing history that shows how much of it has already been invoiced.
| Record | What it tells you | Check on each invoice |
|---|---|---|
| Subcontract | Original value, scope, retainage rate, job | Right subcontractor, right job, right subcontract number |
| Approved change orders | Signed increases or decreases to the subcontract value and time | Only approved change orders raise what can be billed |
| Schedule of values | How the value splits into billable lines | Each billed line is within its scheduled value |
| Billing history | Billed to date and remaining balance | This invoice fits inside the remaining balance |
Subcontract change orders are signed by both the contractor and the subcontractor. On the AIA subcontract change order form (G701S), signing records agreement on all terms of the change, including the new subcontract sum and any change in time. A construction change directive is not part of the subcontract sum until it has been agreed and recorded as a change order.
How to match the invoice, step by step
Identify the subcontract, recalculate its revised value from approved change orders, confirm the invoice fits the remaining balance, check the lines, hold unapproved change-order work, then apply retainage.
- 1Find the subcontract the invoice bills against: the subcontract number, job and subcontractor should all agree.
- 2Work out the revised subcontract value: the original value plus every approved change order, and nothing that is still pending.
- 3Subtract what has already been billed to get the remaining balance, and confirm the invoice fits inside it.
- 4Check each billed line against its schedule-of-values line, including the lines added or increased by approved change orders.
- 5Hold any amount billed against a change order that has not been approved, and send the rest through approval.
- 6Calculate retainage on the approved amount at the subcontract’s rate, then update billed-to-date and the remaining balance.
The line check matters as much as the total. A subcontractor can stay inside the overall balance while billing one line past its scheduled value, which usually means a change order has been billed before it was approved, or base-scope work has been billed twice. See the schedule of values guide for how lines are set up and how approved change orders are added.
Worked example: a progress bill that includes change-order work
An electrical subcontract of $480,000 with one approved change order of $36,000 has a revised value of $516,000. After $310,000 billed to date, $206,000 remains, so a bill for approved work of $52,000 fits; the $9,500 billed on a pending change order is held.
| Item | Amount | Treatment |
|---|---|---|
| Original subcontract value | $480,000 | Executed subcontract |
| CO-03, added circuits (approved) | $36,000 | Counts toward the revised value |
| CO-04, relocated panel (pending) | $9,500 | Not counted until approved |
| Revised subcontract value | $516,000 | Original plus approved change orders |
| Billed to date before this invoice | $310,000 | From prior approved bills |
| Remaining before this invoice | $206,000 | Revised value minus billed to date |
The subcontractor’s invoice for the period bills three amounts:
| Invoice line | Billed | Decision |
|---|---|---|
| Base scope, rough-in (schedule-of-values line 4) | $34,000 | Approve: within the line and the balance |
| CO-03 added circuits | $18,000 | Approve: change order is approved and the line has room |
| CO-04 relocated panel | $9,500 | Hold: change order not yet approved |
- Approved for payment: $34,000 + $18,000 = $52,000.
- Retainage at 10%: $5,200, so the net payable now is $46,800.
- Billed to date becomes $362,000 and the remaining balance $154,000.
- If CO-04 is approved later, the revised value rises to $525,500 and the held $9,500 can be approved on its own or rebilled.
Work out the hold with the retainage calculator, and see what retainage is for how it is released.
Common mismatches and what to do about them
Most problems come from timing: change-order work billed before the change order is signed, change orders counted twice, or a subcontract value that was never updated after a change was approved.
| Mismatch | Usual cause | What to do |
|---|---|---|
| Invoice bills a change order you cannot find as approved | Work started on a verbal go-ahead or a pending change order | Hold that amount; approve or reject the change order, then release |
| Invoice total exceeds the remaining balance | Approved change order not yet entered on the subcontract, or overbilling | Check the change-order log first; if nothing is missing, short-pay or return the bill |
| A line bills past its scheduled value | Change-order work billed against a base line | Ask the subcontractor to bill the change order on its own line |
| Change order approved with the owner but not with the sub | The owner-side change was never issued to the subcontractor | Issue the subcontract change order before approving the bill |
| Retainage looks wrong | Retainage calculated on the gross bill including held amounts | Calculate retainage only on the amount approved for payment |
Should you pay for work on a pending change order?
Not through the subcontract until the change order is approved, unless your subcontract allows payment for directed work in another way. Hold the amount, keep the work moving, and settle the change order quickly so the subcontractor is not financing your paperwork.
Slow change-order approval is a common reason subcontractor bills get stuck. If change orders routinely sit for weeks, fix the approval route for change orders rather than paying around it. The subcontractor invoice workflow with Procore and QuickBooks covers who should own each step when project management and accounting live in different systems.
Aequo Build
How Aequo Build matches subcontractor invoices to subcontracts and change orders
Each subcontract in Aequo Build records the job, subcontractor, original value, retainage rate, approved changes, revised value and remaining balance. A change order is entered against a job, can be linked to one subcontract or purchase order, carries an optional markup, and must be allocated across lines of the job’s schedule of values so the allocations add up to the change-order total.
Approving a change order requires approval permission and updates everything in one step: the linked subcontract’s approved changes, revised value and remaining balance, the schedule-of-values lines, the job’s contract value, and the committed cost on the cost code. Rejecting one requires a reason, which is kept in the audit trail. Pending change orders do not change the subcontract value.
When a subcontractor invoice arrives without a purchase order, Aequo Build looks for that subcontractor’s active subcontract using the subcontract number on the invoice, the scope and job, and whether the amount fits the remaining or revised value. The match records which subcontract it was checked against, anything outside tolerance goes to review, and when the bill clears, billed-to-date and the remaining balance on the subcontract update. After a change order is approved, open exceptions on that job’s purchase orders are re-checked automatically.
The check is made against the subcontract as a whole, so a reviewer still compares the invoice lines with the schedule of values. Aequo Build connects to QuickBooks Online today; Procore and QuickBooks Desktop connections are in development.
Frequently asked questions
How do I match a subcontractor invoice to a subcontract?
Confirm the subcontract number, job and subcontractor, then check the invoice against the revised subcontract value (original plus approved change orders) minus what has already been billed. Check each line against the schedule of values and hold anything billed on a change order that is not yet approved.
What is the revised subcontract value?
The original subcontract value plus the net total of approved change orders. Pending or proposed change orders are not included until they are approved.
Can a subcontractor bill for a change order before it is approved?
They can submit the bill, but the amount should be held until the change order is approved. Paying it early removes your leverage to settle the price and leaves the subcontract value out of step with what you have paid.
Should change-order work be billed on its own line?
Yes. Ask subcontractors to bill each approved change order on its own schedule-of-values line. It keeps the base scope and the change separate, makes percent complete checkable, and shows whether the change order has been billed in full.
Is retainage withheld on change-order work?
Usually, at the same rate as the rest of the subcontract, unless the subcontract or the change order says otherwise. Calculate it only on the amount approved for payment.
Does Aequo Build work with Procore change orders?
Not yet. The Procore connection is in development. Today change orders are entered in Aequo Build, which connects to QuickBooks Online.
Related guides and tools
Sources
This guide is general information, not legal advice. What a subcontractor can bill for, and when, depends on your subcontract and change-order terms.
Part of the Construction AP Knowledge Centre.