Retention


Retention

A common practice in the construction industry is to retain an amount from payments for some percentage of a job until the job is complete. For example, if a job had a retention policy of 5% for 50%, that would mean 5% of each payment from the customer to your company is retained by them, or held back, until the job is 50% complete. After the job is more than 50% complete you will receive the full amount of each payment. When the job is 100% percent complete, as part of your final payment you will be paid in full to include all amounts that were previously retained.

When you submit a bill the amount that will be retained is subtracted from that bill and placed into your retention receivable account. The sum of this account is shown on the Balance Sheet. The remainder of the bill goes into accounts receviable until the bill is paid. When a job completes, any amounts retained by the customer become receviable and will automatically be paid to you as cash within one period. There is no need to rebill for retained amounts.

Retention does not have a profound effect on your company, but it is something to keep in mind when budgeting your cash.


Change Orders
Subcontracting