Retentions are a loan to your customer. Manage them like one.

A 5% retention on a £2m contract is £100,000. Half of it is released at practical completion and the rest at the end of the defects period, typically twelve months later. Multiply across a live order book and most contractors have several hundred thousand pounds sitting with customers at any one time.

Why it goes wrong

Retentions get lost for mundane reasons. The job finishes, the team moves on, the release date passes, and nobody sends the invoice. Or the customer disputes the defects and the conversation drifts. Or the main contractor goes under and the retention goes with it. Industry estimates put unrecovered retentions in the hundreds of millions of pounds a year.

What a retention ledger looks like

For every job: contract value, retention percentage, amount deducted to date, first moiety release date, final release date, amounts invoiced and received, and a note of who to chase. Reviewed every month. It's not complicated, and it's the piece most contractors don't have.

Retentions in your accounts

Retentions are debtors, but they aren't ordinary debtors: they aren't due yet. Showing them in the same aged debtor list as last month's certified application makes the cash position look better than it is. We show them separately, with their release dates, and exclude them from the short-term cash forecast until they're actually due.

Negotiating them down

If you have the leverage: retention bonds instead of cash retentions, lower percentages, shorter defects periods, or a cap. All are worth asking for on every tender.

This article is general guidance and not advice on your circumstances. Talk to your accountant before acting on it.