Retainage

What it means in practice

Retainage usually runs at 5 or 10 percent of each payment. The contract sets the rate, several states cap it, and it is common on commercial work and rare on residential unless a lender is involved.

Show it on every progress invoice as its own line so both sides can see the amount building up, then bill for its release as a separate final invoice. Retainage that is never invoiced quietly becomes the client's money.

Covered in full in the guide to progress billing.

Where it shows up on the paperwork

Its own line on every progress invoice, showing the percentage and the amount held from that payment, and then a separate final invoice when it is released.

What goes wrong

• Never invoicing for its release, so the held money quietly stays with the client.
• Not tracking the running total, so nobody knows what is outstanding at the end.
• Agreeing to retainage on a small residential job where it does not belong.

The tools for this

Related terms

• Progress billingInvoicing one job in stages as they are completed, rather than in a single invoice at the end.
• Final invoiceThe last invoice on a job, billing whatever is left after deposits and progress payments.
• Lien waiverA signed document giving up your right to place a lien on a property, usually exchanged for payment.
• Milestone billingInvoicing when a named stage of a job is finished rather than at the end.

All 57 terms