Retainage is an amount of money earned but held back from payment by a General Contractor or Owner until the end of the job (or some other time specified in the contract). Retainage is meant to serve as an insurance policy in case some of the work performed is not of sufficient quality, or if the scope of work performed does not match the scope provided in the contractor’s bid.
A standard value for retainage is 10%. If you’re a subcontractor, please make sure you negotiate retainage carefully! It can be very hard to get prompt release of your retainage (which is rightfully your money) after a job ends; it’s often better to negotiate a partial release of retainage at 85% or 90% completion.
Also known as: Retention, Hold back
A subcontractor signs a $10,000 contract specifying 10% retainage on each invoice. At the 50% completion milestone specified in the contract, they bill $4,500 ($5,000 for work completed minus $500 for retainage). Upon completion of the project, they submit an invoice asking for their retainage to be paid out.
Knowify supports retainage, particularly with its AIA-style invoicing (also known as pay-apps) featureset. In fact, Knowify will let you change your retainage amount part way through a job, and will correctly adjust your next pay app! This feature is particularly handy if you negotiate a reduction in retainage toward the end of a job (which is a good idea!).
See how it works:
Creating a retainage invoice in the AIA format