What is a retainage in construction?

Retainage is the withholding of a portion of the funds that are due to a contractor or subcontractor until the construction project is finished. It is meant to serve as a financial incentive and an assurance that the contractor will complete the project in a satisfactory manner.

Who holds retainage in construction?

Retainage typically ranges from 5-10% of each progress payment. A construction project’s retainage is set by the construction contract between the parties, in which both sides agree to some percentage withheld from each progress payment. Read the most comprehensive explanation of retainage and how it works.

What is retainage in project management?

Retainage refers specifically to the idea of a portion of the contract payment to be withheld pending completion and delivery of the final product. This term is defined in the 3rd edition of the PMBOK but not in the 4th.

What does retainage mean in accounting?

Tax Accounting. Contracts may include a provision that allows one party to withhold a certain percentage of the total payment called for under the contract until a project is substantially complete; the amount withheld is commonly referred to as a retainage.

What does 5% retainage mean?

The basics of retainage Retainage, also called retention, is an amount withheld from the contractor until a later date. It’s fairly common, especially on commercial and public construction projects, and typically ranges from 5 – 10% of the total contract price.

How much should a contractor hold back?

The standard hold-back amount is about twice the value of the punch list items. How much retainage? Retainage is typically in the 5% to 10% range, although some contractors will negotiate for a fixed fee or limit.

Is retainage an asset?

The contractor, to whom the retainage is owed, records retainage as an asset. The client, who owes retainage to the contractor, records retainage as a liability. Retainage receivable accounts have a normal debit balance; retainage payable accounts have a normal credit balance.

What is a retainage invoice?

From Wikipedia, the free encyclopedia. Retainage is a portion of the agreed upon contract price deliberately withheld until the work is substantially complete to assure that contractor or subcontractor will satisfy its obligations and complete a construction project.

What is retainage payable?

Retainage is the withholding of a portion of the final payment for a defined period to assure a contractor or subcontractor has finished a construction project completely and correctly.

What is a 10% hold back?

What is the holdback? The holdback is the last 10 per cent of the total value of the contract you “hold back” from the contractor after substantial completion of the job. The holdback exists to protect you from liens – by the contractor, his sub-trades or suppliers – against your property.

What can I do if a contractor doesn’t finish the job?

If the job is incomplete and a solution cannot be found, you could stop paying the contractor, fire your contractor and/or hire another contractor to complete the job (remember to keep a paper trail of work completed and costs). 6. File a complaint with a local government agency, like the Consumer Beware List.

What is the difference between retention and retainage?

These two terms are often used interchangeably, but in certain cases the terms retainage and retention have different meanings. In construction, retainage may refer to the amount being held back, and retention could indicate the act of withholding the money.

What is accounts receivable retainage?

Accounts receivable retention refers to money the customer holds back that they’ll eventually pay to the contractor. Accounts payable retention is the money the contractor retains until disbursing it to subcontractors.

What is a retainage fee?

Retainage fee is an amount withheld from a contractor by the client or project owner. It is usually negotiated and agreed upon before the start of a project.

What is retainage receivable?

Definition of Retainage Accounts Receivable. Retainage Accounts Receivable means those portions of Eligible Export-Related Accounts Receivable or Eligible Export-Related Overseas Accounts Receivable arising out of a Retainage.

What is retainage billing?

Retainage Retainage refers to the holding back of a portion of invoice payments by clients until they sign off on a project. This is most common in the construction industry, but also found in any project-oriented company. BillQuick Online allows you to set a retainage percentage and a maximum retainage amount in the Project–Billing screen.

What is a retainage in construction? Retainage is the withholding of a portion of the funds that are due to a contractor or subcontractor until the construction project is finished. It is meant to serve as a financial incentive and an assurance that the contractor will complete the project in a satisfactory manner. Who holds…