Managing Retention Funds in Your Trade Contracts
8 September 2026 · 5 min read · By Heaney Accounting
Retention money is standard in many building and construction contracts, but it often causes headaches for tradies. When a client or head contractor holds back a percentage of your invoice until the job is fully completed or a defects liability period passes, it affects your immediate bank balance.
Why tracking matters for your cash flow
Failing to account for these withheld amounts can make your business look more profitable than it actually is on a month-to-month basis. You need to keep a clear record of what is owed and when it is due to be released so you can plan your expenses accordingly.
- Create a dedicated 'Retention Receivable' account in your accounting software.
- Note the specific release date for every retention hold in your calendar.
- Send a reminder invoice or request letter one week before the release date.
- Check your bank statements regularly to ensure the funds actually land on time.
Pro Tip: Always clarify in your initial contract exactly when the retention period ends. If the contract is vague, you could be waiting months longer than necessary for your own hard-earned money.
- Review the contract to confirm the retention percentage.
- Match the withheld amount against the total invoice value.
- Contact the project manager to confirm the hold is intentional.
- Schedule the follow-up for the release date.
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