Retainage is the percentage of each payment that owners or general contractors hold back until a project is substantially complete. On industrial contracts in Northwest Ohio, this is typically 5% to 10% of each progress billing. The money is yours, but you won’t see it for months. Your books need to reflect this reality.

Set up a separate retainage receivable account in your chart of accounts. This sits alongside your regular accounts receivable but tracks only the withheld amounts. Keeping retainage separate lets you see at a glance how much you’ve earned but haven’t collected, and prevents you from treating that cash as available when it isn’t.

When you send a progress bill, split the entry. If you bill $50,000 and the contract has 10% retainage, you record $45,000 to regular accounts receivable and $5,000 to retainage receivable. The full $50,000 hits revenue because you earned it. The split just shows where the money is sitting until you collect it.

Track retainage by job. You need to know how much is held on each project, not just a company-wide total. When retainage releases at project completion, you’ll need to invoice for the correct amount. Without project-level tracking, you’re guessing or digging through old invoices to piece it together.

Most industrial contracts release retainage after substantial completion and final inspection. Some release half at substantial completion and the rest after a warranty period. Know your contract terms and track the release dates so you can invoice promptly. Money sitting in retainage longer than necessary is money you could be using.

On your financial statements, retainage receivable shows as a current asset if you expect to collect within a year. For long-term industrial projects, some of it might be classified as long-term. The classification affects how your balance sheet looks to banks and bonding companies, which matters if you need credit or larger bonds.

Cash flow planning has to account for retainage. A project might look profitable on paper, but if 10% of every dollar you bill sits in retainage for nine months, your actual cash position is different from what the income statement suggests. Many contractors get caught short because they spend based on revenue earned rather than cash actually in the bank.

The common mistake is not tracking retainage at all, just billing the net amount and treating it as one lump of receivables. This creates problems when you try to reconcile what customers owe you, when you need to report aging accurately, and when a Findlay bookkeeper or accountant has to make sense of your records for tax preparation or financial review.

If you’re using QuickBooks, the retainage workflow requires some configuration. Progress invoicing needs to be set up correctly, and the retainage account needs to be created and linked properly. Getting this right from the start saves cleanup work later and gives you reports that actually tell you what’s going on with each job.