Progress invoices net of retention
How a contractor raises progress invoices net of retention, invoices the retention when released, and gets completion and defects-period reminders.
By Achekam · · 4 min read · For Construction businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
Retention is the contractor's own money, held by someone else. Every progress payment arrives a little short because the client keeps back part of it as security for the work, and that money comes back only when the contract says it should, usually in stages around practical completion and the end of the defects period.
The difficulty is not understanding retention. It is keeping track of it across many jobs, over a long time. A job that finished last year may still have retention due, and if the release date passes without a claim, nobody at the client's side is going to chase you to pay it.
Achekam's Industry CRM handles both halves for a contractor using the Construction & contracting pack: progress invoices net of retention while the job runs, and an invoice for the retention when it is released.
Retention in plain terms
On a typical building contract, the client pays the contractor in stages as work is valued, and each payment is reduced by a retention amount. The contract sets how much is held, any limit on the total, and when it is released. Release is often split, with part coming back at practical completion and the rest after the defects period, once the client is satisfied the defects have been fixed. AccountingTools' definition of retainage describes the same arrangement: part of the contract price withheld until the project is completed, to make sure the work meets the agreed standard.
Two consequences follow for the contractor's books. Each progress invoice is for less than the work valued, and the retention held builds up as an amount the client owes you later. Both need to be visible, job by job, if you are going to collect it.
Progress invoices net of retention
With the pack, a progress invoice is raised net of retention, so the invoice the client receives matches the amount they expect to pay for that valuation. The progress claim behind it remains your own figure: the pack does not calculate progress claims or retention releases. Your quantity surveyor or contracts manager values the work and works out the retention under the contract, and the invoice carries those figures.
Like any invoice, it starts as a draft you can change or delete. Issuing it takes the next number in your sequence and posts it to the ledger as debtors, sales and output VAT. How VAT applies to retention depends on your contract and your country's VAT rules, so agree the treatment with your accountant before the first progress invoice goes out.
Invoicing the retention when it is released
When retention falls due, it is invoiced as its own invoice rather than being remembered and added to some later bill. The pack's starter catalogue includes a retention release item, along with contract works, preliminaries and generals, variations and daywork labour and plant. Every item comes unpriced, and the catalogue posts to two revenue accounts, Contract revenue (4370) and Variations and extras (4380), so construction income lands on accounts that say what it is.
Because the release amounts are your own figures, the invoice is only as good as your record of what is held. Keep the retention held per job up to date as each progress invoice is issued, and the release invoice becomes a short task instead of an archaeology project.
Reminders at practical completion and through the defects period
Retention is lost to forgetfulness more often than to disputes. The pack has reminders for practical completion and for the defects period, so the dates that trigger retention claims are put in front of someone rather than left in a contract file.
A few rules govern every customer reminder in the Industry CRM:
- Each reminder stays off until a workspace administrator switches it on.
- Each one is sent at most once, and reminders are limited by a daily cap.
- Reminders go by e-mail and in the app only, with no SMS or WhatsApp.
Switch on the reminders you want before the first job reaches practical completion. A reminder that is still off when the date passes does nothing.
The figures stay yours
It is worth repeating, because it is easy to assume otherwise: nothing in the pack calculates a progress claim, a retention amount or a release. The pack carries the amounts you enter onto the right invoices and puts the right dates in front of you. The valuation, the retention under your contract and the agreement with the client's quantity surveyor are professional work that stays with your team.
A retention register for every job
Even with the pack doing the invoicing, keep a short register per job. For each one, record:
- the retention terms in the contract, in your own words;
- the retention held to date, updated with each progress invoice;
- the practical completion date and the date the defects period ends;
- each release claimed, when, and for how much;
- each release received.
Review the register monthly with the reminders. A job that shows retention held, a release date in the past and no claim is money waiting for you.
Where this fits in the job
Progress invoicing runs while the job is On site. The close-out steps, including the snag list, completion certificates and retention claims, are covered in snags, defects period and final account. Signed variations change what you invoice, so read change orders priced, approved and signed, and for the records behind every job, jobs, estimates and bill-of-quantities lines.
Before your next valuation, list every finished job that still has retention held and the date it is due back. That list is the first thing to put into the pack.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
