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The owner's glossary

Retainage

Retainage is the portion of a construction progress payment withheld until contractual release conditions are met. It delays cash collection but does not automatically reduce the contract price or earned revenue. Track it separately from ordinary receivables, and check the contract and applicable law before assuming a withholding rate or payment deadline.

Updated

Retainage withheld = eligible progress billing × agreed retainage rate

Current amount payable = eligible progress billing − retainage withheld

Examples use made-up numbers. Education only, not tax, legal or investment advice.

Example

The setup

  • Example company: Ridgeline Builders Co. (fictional).

  • Illustrative example.

  • Independent fictional scenario: Ridgeline Builders Co. submits a $100,000 eligible progress billing with agreed 5% retainage.

  • Withholding is $5,000 and the current amount payable is $95,000, assuming no other deductions.

  • This is not a legal rate recommendation or a change to the series WIP ledger.

Your next step

What would change your next decision after you check this against your own records?

Educational content, not tax, legal, accounting or investment advice.

Questions owners ask

Is retainage a discount?

No. It is withheld payment subject to release conditions, not automatically a reduction in contract price. Disputes or agreed adjustments can change the ultimate amount collectible.

When can Ridgeline collect retainage?

When the applicable contract conditions and legal requirements are satisfied. Do not assume every project releases it at substantial completion or on the same deadline.

Does retainage mean revenue has not been earned?

Not necessarily. Cash payment timing and revenue recognition differ. Evaluate earned revenue under the applicable accounting method and track the withheld balance separately.

Sources