Retainage, construction payments, cash flow management, and real-time financial visibility—integral parts of your accounting that you need to keep track of as a contractor. They’re the key to keeping your business running smoothly while navigating the industry’s unique financial challenges. One of the biggest disruptors to a contractor’s cash flow is retainage: the percentage of payment withheld until a project reaches substantial completion. If not managed carefully, it can cripple your working capital.
In this blog, we’ll break down how retainage works, how it affects your financial health, and how tools like Truss can help you maintain real-time visibility into your funds and stay ahead of payment delays.
Key Takeaways
- Understand what retainage is and how it works in construction contracts
- Learn how retainage can affect your cash flow and profitability
- Discover ways to track retainage in real time and avoid funding gaps
- See how Truss supports retainage and construction payments
- Improve cash flow management with integrated accounting tools
What Is Retainage?
Retainage (or retention) is a standard contract clause allowing the project owner to withhold a portion—typically 5% to 10%—of each payment until the job is substantially complete. It’s a safeguard designed to ensure quality work and timely completion, but it creates a serious challenge for contractors: getting paid in full often takes months.
Here’s how it works:
- You invoice the client for $100,000
- A 10% retainage is applied, so you receive $90,000
- The remaining $10,000 is held back until the end of the project or after a warranty period
That $10,000 might not seem like much at first, but when you’re juggling multiple jobs, retainage across several projects can tie up tens (or hundreds) of thousands of dollars in unpaid earnings.
ProTip: Always clarify retainage terms up front and document them on every invoice. Consistency is critical when tracking withheld amounts.
How Retainage Affects Cash Flow
Retainage has a direct impact on cash flow management. While your project may be profitable on paper, your actual bank balance can tell a different story. When retainage is scattered across several clients and invoices, it becomes difficult to assess your available working capital, which affects your ability to:
- Pay subcontractors
- Purchase materials
- Bid on new jobs
- Cover operational overhead
Even worse, retainage is often delayed further due to inspection requirements, disputes, or slow-moving administrative processes. Contractors who don’t have a system for managing retainage often face stalled growth and liquidity issues.
ProTip: Build retainage expectations into your cash flow projections and avoid relying on retainage income for day-to-day operations.
Managing Retainage With Real-Time Financial Visibility
To manage retainage effectively, you need real-time visibility into your construction payments and outstanding balances. This is where Truss makes a difference.
With Truss, contractors get access to a centralized financial hub that:
- Tracks incoming and withheld payments across all projects
- Integrates with accounting tools like QuickBooks for clean books
- Provides custom reporting to flag retainage amounts and due dates
- Simplifies invoice tracking and follow-ups
By using Truss, you can identify how much retainage is owed to you at any given moment and plan ahead—rather than waiting and wondering.
Manage your cash flow effectively, even with retainage. Get real-time financial visibility with Truss.
How to Track Retainage in Your Books
Many contractors struggle with accounting for retainage. It’s easy to accidentally treat it as earned income, which can distort financial reports and misrepresent your actual revenue.
Truss helps you keep retainage separate from your primary receivables so that:
- Your income statements remain accurate
- You avoid overstating profits
- You can easily reconcile payments when retainage is released
With built-in accounting integrations, your financial records stay clean and compliant. No more spreadsheets or manual corrections.
See how integrated accounting helps track retainage accurately in your books.
Avoiding Common Pitfalls
Retainage might be unavoidable, but the mistakes surrounding it are not. Here are a few common pitfalls—and how Truss helps you avoid them:
1. Forgetting About Retainage in Cash Flow Forecasts
Contractors often plan based on full invoice values without adjusting for withheld retainage. Truss reports give you a clear snapshot of what’s received and what’s still pending.
2. Chasing Down Final Payments Too Late
If you wait until project closeout to start asking about retainage, you’re already behind. With Truss, you can set reminders and flag release dates early.
3. Commingling Retainage and Revenue
Combining withheld retainage with earned revenue distorts your financials. Truss keeps these numbers separate so you can run clean, transparent reports.
Creating a Retainage Strategy That Supports Growth
Just because retainage is a slow-moving part of construction doesn’t mean your business has to be. When you know where your money is—and when it’s coming—you can make smarter decisions about hiring, project timelines, and material orders.
Here’s how a proactive retainage strategy looks with Truss:
- Clear retainage tracking on every invoice
- Dashboard visibility across jobs and payments
- Seamless accounting syncs for real-time updates
- Predictable cash flow even with staggered payments
The result? You move from reactive payment management to proactive financial control.
Truss Helps You Keep Track of Retainage
Retainage is part of the construction game—but it doesn’t have to disrupt your financial momentum. With the right tools, you can track it, plan for it, and work around it.
Truss provides the visibility and integrations contractors need to confidently manage construction payments, even when funds are delayed. Get clarity, control, and consistency in your cash flow.
Disclaimer: Truss provides tools to help contractors manage and streamline payments. However, Truss is not responsible for financial, legal, or employment decisions made by its users. Always consult with an accountant or legal professional for personalized advice.
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