Retainage is the portion of each progress payment that the paying party holds back until the work is complete or accepted. An owner withholds it from the general contractor’s pay applications, and the general contractor withholds it from each subcontractor’s billings, usually at the same rate the owner uses. The rate is set in the contract, commonly five to ten percent, and some states cap it or require it to be reduced once a job passes a point of completion. The held amount is released on the terms the contract sets: at substantial completion, at final acceptance, or in steps as parts of the work are accepted.
Retainage is money the contractor has earned but cannot collect yet, so it shapes cash flow on every job. On the payable side, a contractor pays each sub net of retainage while job cost has to stay gross, so the held amounts have to be tracked on every subcontract until release. On the receivable side, the retainage held by the owner sits on the contract until release, and the final release usually waits for the final lien waiver.
In Aquifer Accounting, contracts and billing withholds retainage on every subcontract bill at the contract’s rate, so job cost stays gross while the sub is paid net, and lets you release part or all of it when the work is accepted, bill by bill or across the whole subcontract. Where the subcontract requires it, the final release waits for a final lien waiver. On the owner side, a pay application posts to accounts receivable with its retainage held, and the retainage the owner still holds is visible on the contract at every draw.
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