How a Miami Subcontractor Stopped Losing Money on Retainage
Sam's List Editorial | 2026-08-03
How a Miami Subcontractor Stopped Losing Money on Retainage This is an illustrative scenario, anonymized and representative of the kind of construction bookkeeping work described below. Figures are for illustration and results vary by contractor. Construction retainage accounting is the quietest way a profitable subcontractor runs out of cash. The work is done, the invoice is approved, and 10 percent of it is not coming for months. If the books do not know that, every report the owner reads is wrong in the same direction. This representative case study follows a Miami mechanical subcontractor who had been in business long enough to be profitable and still could not predict cash within a month. The Problem Retainage was buried inside regular accounts receivable. Every progress invoice included a retainage holdback, and the full invoice amount sat in AR as one balance. Nothing distinguished the portion due in 30 days from the portion not due until the general contractor closed out the job, which on the larger projects meant a year or more after the work was finished. The result was a receivables aging report that described a business in trouble. Balances showed as 90 and 120 days past due. Collections calls went out on money that was not yet owed, which irritated the general contractors the company most wanted to keep. Meanwhile the retainage that genuinely was collectible, on jobs closed out two years earlier, sat in the same undifferentiated pile and nobody was asking for it. Three specific costs came out of that: The collections process was aimed at the wrong balances, so real problems and contractual holdbacks got the same treatment. A line of credit conversation was built on an aging report the bank read as poor collections rather than as normal industry terms. And an amount the owner could not quantify, spread across closed jobs, was sitting uncollected because no report ever surfaced it. The Approach The work was a reporting fix rather than a tax project, and it had three parts. Separate the receivable. A distinct retainage receivable account was created, tracked by job, so each invoice split between what was currently due and what was contractually held back. Regular AR aging immediately started describing actual collections performance. Log the release conditions. For every contract, the retainage percentage and the specific conditions triggering release, whether substantial completion, final lien waivers, punch list signoff, or owner closeout, were recorded with the job. Retainage does not become collectible on a date. It becomes collectible on...
