Retainage, also called retention, is a percentage of each progress payment, commonly in the range of 5 to 10 percent, held back until the project or a defined phase is complete. It gives the paying party leverage to make sure punch-list items are finished and closeout documents are delivered. Many states limit retainage percentages or require prompt release on public and private projects.
For contractors, retainage is earned revenue that arrives late, sometimes months after the work. It should be tracked separately in receivables and modeled with its own timing in cash forecasts. Subcontractors are often affected twice, because general contractors may pass the owner's retainage down to them.