Retention Payments in Construction: Are You Chasing Yours?

In construction and contract services, retention payments are a standard part of how main contractors manage risk. They hold back a percentage of the contract value, typically two and a half percent on practical completion and another two and a half percent at the end of the defects liability period, usually twelve months later.

On paper, that money comes back to you. In practice, it often doesn't.

Why retention money goes uncollected

The problem usually isn't that main contractors refuse to release it. Most of the time, the problem is simpler: nobody is keeping track of the dates and nobody is chasing the payment when it falls due.

Retention release dates come and go. The person handling your finances either doesn't have a system for tracking them or doesn't know the money is owed. The main contractor isn't going to volunteer the payment. It sits on their books until someone asks for it.

One client came to me having never had their retention chased at all. Their previous finance person had been doing the bookkeeping perfectly well, but retention tracking wasn't part of what they did. Five percent of every completed contract, year after year, just sitting there uncollected because nobody was following up.

How much money is involved

Take your annual turnover from contract work and multiply it by five percent. That's roughly how much retention is being held at any given time, assuming a twelve-month defects period.

For a business turning over a million pounds in contract work, that's fifty thousand pounds in retention sitting with main contractors. Even if you're collecting most of it, missing a handful of release dates each year adds up to a meaningful amount.

What a tracking system looks like

It doesn't need to be complicated. You need a record of every contract where retention is held, the amount, the practical completion date, the defects liability period, and the calculated release dates. Then someone needs to check those dates regularly and chase the main contractor when payment falls due.

Some businesses track this in a spreadsheet. Others build it into their accounting software. The method matters less than the consistency. What kills retention recovery isn't the lack of a system. It's the lack of someone checking it every month.

The wider cash flow picture

Retention tracking is most powerful when it's part of a proper cash flow forecast. If you know how much is due back and when, you can plan around it. You can factor it into your projections, reduce your reliance on invoice finance, or time purchases to coincide with retention releases.

Without that visibility, the money arrives unpredictably and gets absorbed into the general cash flow without anyone really noticing the benefit.

I've put together a guide for subcontractors covering retention tracking and four other common financial issues in contract businesses. You can download it from my contracts page.