Retainage (also called retention) is a portion of the agreed upon contract price deliberately withheld until the work is substantially complete to assure that a contractor or subcontractor will satisfy its obligations and complete a construction project. Typically 5-10% of the total cost of the job.
Why track retainage in Planyard?
Calculating retainage manually takes a lot of time and mistakes are easy to happen and difficult to track.
So, what you can do instead is:
- Set retainage for a contract
- Accept a progress report from a subcontractor for that contract
- The subcontractor receives the details for invoicing you correctly (i.e. it shows the total sum, retainage % and their difference)
The latter (the difference between the total that was reported as progress minus the retainage) should be used by the subcontractor for invoicing you. This ensures that you won't have different numbers in Planyard and in your accounting system.
When the invoice is sent by the subcontractor, the project manager can be (and make sure) that the retainage was calculated properly.
How to set retainage
When you create a contract, you can also set retainage. In fact, you can set multiple retainages.
For example, there could be one that you release right after the works have been completed and one that you release X months or years after all the works have been completed.
You can also add retainage to an existing contract provided that there are no approved progress reports for that contract.
Note that inserting VAT is optional.
How to release retainage
To release retainage, open up the contract in Planyard. You'll find a button called "release retainage" there. You can specify the amount there.
How accounting is affected
First, please make sure that you've added your accountant's email under integrations, so, that accounting would receive all the updates to their email address.
When retainage gets released, an email gets automatically sent to the accountant who can then pay it out to the subcontractor.