Retainage accounting: track it, bill it, collect it.
Retainage is the single largest pile of forgotten money on most contractors' balance sheets. Here's how to make sure you're not leaving any on the table.
What retainage actually is
Retainage (sometimes called "retention") is a percentage — usually 5% or 10% — that an owner or GC holds back from every progress payment until the job is substantially or fully complete. It's meant to give the owner leverage if there's a punch list or defect. It's also, in practice, where contractor cash goes to die.
On a $1M job at 10% retainage, you're carrying $100K in receivables from start to finish. If you're running five active jobs of similar size, that's half a million dollars you worked for — sitting on someone else's balance sheet.
Five steps to clean retainage.
Track it as a separate AR line
Retainage should never live inside your normal accounts receivable. It belongs in its own 'Retainage Receivable' account on the balance sheet. Same for retainage payable to your subs — separate line, separate aging.
Bill it on the invoice, don't 'wait' for it
When you send a progress bill, you show the full amount, then subtract retainage held. Both numbers hit QuickBooks on the same day — total billed to AR, retainage to Retainage Receivable, net due to normal AR.
Run a retainage aging report every week
Same way you run AR aging — but for retainage only. Every open job shows its retainage balance and how long it's been outstanding. This is the report that finds the $30K–$50K most contractors forget about.
Chase it like real money — because it is
Most retainage is collectible 30–60 days after substantial completion. If it's sitting past 90 days, something is stuck — punch list, closeout docs, a lien waiver, or a conversation. Call.
Release sub retainage in lockstep
Don't release retainage to your subs until you've collected it from the owner. Keep a matched pair on every job. If you don't, you're financing your GC's closeout — and you'll feel it.
Most of these are why the money's stuck.
Counting retainage in 'normal' AR
Makes your AR aging look worse than it is, and masks the real problem. Banks don't like it either.
Booking retainage to income on cash basis
You pay tax on money you haven't collected. And when closeout drags, you're underwater.
Forgetting lien waivers and closeout docs
Almost every stuck retainage we audit is stuck because a lien waiver or closeout package never got filed. Fix the docs, get the check.
Not matching sub retainage to GC retainage
Releasing a sub's retainage before collecting your own is a timing trap. Match the two.
You'll meet with
Cory Salisbury
How much retainage are you owed right now?
Book a free 30-minute call. We'll run a quick retainage audit on the call and tell you what's collectible.
What we'll cover
- A 10-minute look at where your numbers are today.
- 3 specific profit leaks I'd chase first for a business your size.
- Whether we're a fit — honest yes or no, no pressure either way.
Pick a date
Weekdays, 11:00 AM – 2:00 PM MT
“Recovered $34,000 in forgotten retainage in Q1.” — Rachel K. · specialty trade, 8 GCs