A construction retention payment (also called retainage) is the amount of money held back until the project is complete. Retainage is usually a percentage of the total project cost. It typically sits at 5% or 10%.
What is the difference between a retainer and a retainage?
The retainer is included in Current Receipts on the Office Earnings report. Retainers may be confused with retainage, which is an amount you withhold from billing a client, as a good faith measure to build trust in your company, or to entice the client to hire your company.
What is the purpose of retainage in construction?
What is Retainage? 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.
What is a retention receivable in construction?
Retention receivable is recorded by general contractors and subcontractors and is the number of funds due from a contractor's customer for retention. Because these funds aren't due until the project is completed, they are recorded in a separate account on the general ledger.
What does retention mean in contracting?
Retention is security held by a procuring contractor to guarantee the performance of a suppling contractor and in particular to safeguard against defects in the event that the supplying contractor fails to satisfactorily rectify them.
What is the penalty for delay in project completion?
This penalization is known as delay damage. Usually, delay damages show up as a per-day charge for each day you are late completing your work. The normal range can be anywhere between $300 – $1,000 per day. As you can see, this daily charge can very quickly eat away at any profit you planned on making.