For builders, it creates a different reality. You\u2019ve already paid for labor, materials, and subcontractors<\/a>, but part of the money you\u2019ve earned is still being held back.<\/p>\n\n\n\n The two most common retainage structures are fixed retainage and variable retainage. The difference comes down to whether the percentage being withheld stays the same throughout the project or changes during the build.<\/p>\n\n\n\n Let\u2019s say you\u2019re building a $200,000 custom home and the contract includes 10% retainage.<\/p>\n\n\n\n You complete the first stage of work and submit a $50,000 progress invoice. The owner approves the invoice, but 10% retainage applies, so $5,000 is withheld, and $45,000 is paid.<\/p>\n\n\n\n A few weeks later, you submit another $50,000 invoice. Again, $5,000 (10%) is retained, and $45,000 is paid. The total retained amount is now $10,000.<\/p>\n\n\n\n With the project moving into the next phase, you submit another $50,000 invoice. The same process repeats. Another $5,000 is retained, and another $45,000 is paid. At this point, you\u2019ve billed $150,000 worth of work but have only received $135,000. The remaining $15,000 is sitting in retainage.<\/p>\n\n\n\n The home is finished, inspections are complete, and the owner signs off on the project. By now, a total of $20,000 has been retained across the job.<\/p>\n\n\n\n Once any remaining punch list items are resolved and the closeout paperwork is approved, the retained amount is released as your final payment. Depending on the project, that might happen a few weeks later or several months after you\u2019ve effectively finished the job.<\/p>\n\n\n\n Retainage may start as a contract requirement, but it affects all stages of a construction job<\/a> lifecycle.<\/p>\n\n\n\n At the estimating stage<\/a> of the build, you need to consider retainage because the timing of payments matters just as much as the job’s value. If 10% of each progress payment is held back, it affects the amount of cash available as the project progresses.<\/p>\n\n\n\n The contract defines the retainage percentage and the requirements for releasing the funds. The clearer these terms are upfront, the fewer surprises you\u2019ll face at the end of the project.<\/p>\n\n\n\n With each invoice you send<\/a>, retainage accumulates. Each payment is reduced by the agreed percentage, widening the gap between what you\u2019ve billed and what you\u2019ve received.<\/p>\n\n\n\n Retainage creates a gap between revenue earned and cash received. Keeping track of that difference is important if you want an accurate picture of how the job is performing financially<\/a>.<\/p>\n\n\n\n Project closeout is where retainage finally comes back into the business. Once the remaining work is signed off and release requirements have been met, the retained amount can be paid out, and the project can be financially closed.<\/p>\n\n\n\n For many builders, retainage becomes a cash flow issue long before it becomes a final payment issue. As more money is held back, less cash is available for daily business operations.<\/p>\n\n\n\n On one project, retainage may only have a small impact on cash flow. The challenge starts when you\u2019re running several jobs at the same time. As retained balances build up, more of your cash becomes tied to completed work and isn\u2019t available to run the business.<\/p>\n\n\n\n Part of your payment is being held back, but the bills don\u2019t stop. Payroll still goes out, materials still need to be purchased, and subcontractors still need to be paid. In the meantime, you\u2019re carrying part of the financial load until the retained funds are released.<\/p>\n\n\n\n Your project reports<\/a> may show a profitable job, but some of that profit is still sitting in retained balances. Until it\u2019s released, those funds aren\u2019t available, which can create pressure in other areas of your business. You may delay equipment purchases, hold off on hiring, or become more cautious about taking on new work while you wait for the money you\u2019ve already earned.<\/p>\n\n\n\n The timing of your retainage release depends on the contract terms, but it typically occurs at one of two stages.<\/p>\n\n\n\n Some construction contracts allow part or all of the retainage to be released at the substantial completion stage. For builders, that\u2019s often the ideal outcome because it gets cash flowing back into the business sooner.<\/p>\n\n\n\n Even when the construction project is close to completion, issues can slow down the release process:<\/p>\n\n\n\n The easiest way to speed up retainage release is to stay on top of closeout requirements throughout the project rather than scrambling at the end.<\/p>\n\n\n\n Construction contracts play a major role in how retainage works, but they\u2019re not the only factor. Depending on the project\u2019s location, state regulations may also affect how retainage is handled.<\/p>\n\n\n\n Some states allow up to 10%, others reduce it mid-project, and in places like New Mexico, retainage isn\u2019t used at all<\/a>.<\/p>\n\n\n\n These rules are designed to create a fair balance between protecting property owners and ensuring contractors aren\u2019t waiting unnecessarily long for payment. Examples include:<\/p>\n\n\n\n In some states, retainage is becoming more tightly regulated. For example, New York caps retainage at 5%<\/a> and requires it to be released within 30 days of final approval, although contractors may be able to invoice for it earlier at substantial completion.<\/p>\n\n\n\n Even if you\u2019re working in a state with clear rules, the contract still controls how retainage plays out on your job.<\/p>\n\n\n\n That\u2019s why it\u2019s important to:<\/p>\n\n\n\n If the terms aren\u2019t clear upfront, it can lead to confusion or delays later, especially when the project wraps up.<\/p>\n\n\n\n Retainage is a standard part of construction, but that doesn\u2019t mean it\u2019s always easy to manage. Most retainage problems come from losing track of the numbers and dates along the way.<\/p>\n\n\n\n Many builders estimate a job’s profitability correctly but underestimate how much of the revenue will be tied up in retainage. Planning around expected payments rather than actual cash received can create pressure later in the project.<\/p>\n\n\n\n Retainage should never be a surprise at the end of a job. The contract should clearly define the amount withheld, when it will be released, and the conditions that must be met first. If those details aren\u2019t clear upfront, collecting retainage can become much harder at the end of the project.<\/p>\n\n\n\n Retainage often gets tracked separately from the rest of the project\u2019s financials. Information ends up spread across spreadsheets, emails, invoices, and accounting systems<\/a>. The more places the information lives, the more likely it is that balances, release dates, and payment status will fall out of sync.<\/p>\n\n\n\n When retainage isn\u2019t tracked closely during the job, it often only gets attention at the end. By that point, delays are harder to avoid, and payments take longer to come through. Staying on top of retainage throughout the job makes it easier to keep the release process moving.<\/p>\n\n\n\n Every project tells a slightly different story. One retained balance might be due next month, another might still be awaiting sign-off, and a third might already be overdue. Buildxact helps bring that information together, so it\u2019s easier to see what\u2019s outstanding and what money is still expected to come back into the business.<\/p>\n\n\n\n Retainage starts with invoicing, so that\u2019s where you first need visibility. Buildxact lets you create invoices, track customer payments, and monitor outstanding amounts from the same system. Instead of manually reconciling invoices against separate retainage records, you can see what has been invoiced, what has been paid, and what is still expected to be paid.<\/p>\n\n\n\n Buildxact integrates with accounting platforms such as QuickBooks and Xero, helping keep invoice and payment information synchronized across your financial systems. This reduces double-handling and gives you a more accurate picture of outstanding payments without constantly updating multiple systems.<\/p>\n\n\n\n One of the biggest challenges with retainage is that project performance and available cash don\u2019t always align.<\/p>\n\n\n\n Because Buildxact tracks invoices, job costs, and project financials together, you can see how each job is performing while maintaining visibility into money that has not yet been received. Job cost reporting and financial tracking help connect retained balances back to the project they belong to.<\/p>\n\n\n\n Retainage is a standard part of construction, but it shouldn\u2019t become a guessing game. The more visibility you have into retained balances and outstanding payments, the easier it becomes to manage cash flow and keep projects moving forward.<\/p>\n\n\n\n With Buildxact, invoices, payments, and project financials stay connected, helping you stay on top of retainage and maintain control of your business finances.<\/p>\n\n\n\n Start for free<\/a> or book a demo<\/a> to see how our award-winning software can help you stay on top of retainage.<\/p>\n","protected":false},"excerpt":{"rendered":" If you\u2019ve ever invoiced a job and been paid less than what you billed, you\u2019ve already dealt with retainage.<\/p>\n You finish a stage, send through a $50K invoice, and $45K lands in your account. The rest is held back. Sometimes for months.<\/p>\n On paper, it\u2019s standard practice. In reality, it creates a gap between the work you\u2019ve completed and the cash you actually have in the b<\/p>\nFixed vs. Variable Retainage<\/h3>\n\n\n\n
![\"\"\/](\"https:\/\/cdn.mediavalet.com\/usca\/buildxact\/C4GbxaDiFky_a7yUGItr7g\/iKGkMoUxbUy308YOqikVzw\/Large\/Fixed%20vs.%20Variable%20Retainage.jpeg\")
<\/figure>\n\n\n\n\n
How Retainage Works on a Real Job<\/h2>\n\n\n\n
![\"\"\/](\"https:\/\/cdn.mediavalet.com\/usca\/buildxact\/vx4gVXyTPUmKPHcO71_17Q\/IPIdLC-d8E69b8EX7GwWFA\/Large\/Retainage%20in%20Construction%20Example.jpeg\")
<\/figure>\n\n\n\nStage 1: First progress payment<\/h3>\n\n\n\n
Stage 2: Second progress payment<\/h3>\n\n\n\n
Stage 3: Third progress payment<\/h3>\n\n\n\n
Final stage: Project completion<\/h3>\n\n\n\n
Where Retainage Sits in the Construction Workflow<\/h2>\n\n\n\n
![\"\"\/](\"https:\/\/cdn.mediavalet.com\/usca\/buildxact\/NSkezgUlzkiTObYEWck01A\/0holE9FmCk6l7RfJheVxnQ\/Large\/Job%20lifecycle%20timeline%20with%20retainage%20layered%20across%20it.jpeg\")
<\/figure>\n\n\n\nEstimate<\/h3>\n\n\n\n
Contract<\/h3>\n\n\n\n
Invoicing<\/h3>\n\n\n\n
Job costing<\/h3>\n\n\n\n
Project closeout<\/h3>\n\n\n\n
How Retainage Affects Cash Flow<\/h2>\n\n\n\n
Money stacks up across multiple jobs<\/h3>\n\n\n\n
You\u2019re funding part of the project yourself<\/h3>\n\n\n\n
Profit doesn\u2019t equal cash in the bank<\/h3>\n\n\n\n
How and When Retainage Is Released<\/h2>\n\n\n\n
![\"\"\/](\"https:\/\/cdn.mediavalet.com\/usca\/buildxact\/a3nc-wOtaE2TA2PyKmfYfQ\/VFgWVUOqUUScHSFL3gd69g\/Large\/Substantial%20vs%20Final%20Completion.jpeg\")
<\/figure>\n\n\n\n\n
\n
What can delay retainage?<\/h3>\n\n\n\n
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What you can do to avoid delays<\/h3>\n\n\n\n
![\"\"\/](\"https:\/\/cdn.mediavalet.com\/usca\/buildxact\/bWCVRSR_u0un3Y6GJcm0Dg\/a1s_Toa76ki1VQvruzwxKw\/Large\/How%20To%20Avoid%20Retainage%20Delays.jpeg\")
<\/figure>\n\n\n\n\n
Retainage Laws and Limits (Quick Overview)<\/h2>\n\n\n\n
\n
Why this matters for your contract<\/h3>\n\n\n\n
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Common Retainage Mistakes Builders Make<\/h2>\n\n\n\n
Not accounting for retainage in cash flow planning<\/h3>\n\n\n\n
Agreeing to unclear release terms<\/h3>\n\n\n\n
Relying on disconnected tracking tools<\/h3>\n\n\n\n
Chasing payments too late<\/h3>\n\n\n\n
How to Track Retainage Across Multiple Jobs With Construction Software<\/h2>\n\n\n\n
![\"\"\/](\"https:\/\/cdn.mediavalet.com\/usca\/buildxact\/231BHVgavE21gFXoe3C0lA\/fLlrBmnnJEqPb-Gfpic63Q\/Large\/Buildxact%20Invoicing%20Features.jpeg\")
<\/figure>\n\n\n\nTrack retained amounts alongside your invoices<\/h3>\n\n\n\n
Keep payment tracking connected to your accounting software<\/h3>\n\n\n\n
Understand how retainage affects job profitability<\/h3>\n\n\n\n
Take Control of Retainage Across Your Jobs<\/h2>\n\n\n\n