Procore Retainage, Tracked Properly

Retainage receivable is what the owner or the general contractor above you holds back from your billings. It is an asset: you earned the revenue and the cash is being withheld. Retainage payable is what you hold back from your subcontractors. It is a liability: they performed the work and you owe them the money. They are opposite sides of the balance sheet, they release on different dates under different conditions, and they must be tracked in two separate accounts. Netting them into a single figure destroys your ability to collect, to age, or to show either one to a surety.

Because retainage is not overdue, it is withheld by contract, and putting it in AR breaks every report that depends on AR. A slice of every invoice you have ever issued ends up sitting permanently in the 90-plus day bucket, so you can no longer tell late money from money that is not due yet. Collections starts chasing customers who owe you nothing. Working capital and the current ratio, the first numbers your bank and surety compute, get misstated. Retainage belongs in its own asset account, split between current and long term by expected release date.

Yes, in two independent places. On the prime contract, retainage is applied to your owner invoices line by line against the schedule of values, at a percentage you configure. On commitments, retainage is applied to subcontractor invoices as you approve them, and released by entering a release on a later invoice. Procore gives you retained-to-date on both sides. What it does not do is post to a general ledger, because Procore does not have one. Where that retainage lands in your books is an accounting decision Procore cannot make for you.

The most common cause is that the invoice syncs net of retainage rather than gross with a separate retainage entry. When that happens the withheld amount never enters your books at all, and the invoice shows as paid in full because the net amount genuinely was paid in full. There is no open balance for anyone to chase and nothing reminding you that the owner is holding a percentage of the contract. The fix is to bill gross, record the net as a normal receivable, and journal the withheld portion into a dedicated retainage receivable account as part of the monthly close.

Because structurally nobody owns it. The project manager who knew about the balance moved to the next job. The accounting system, if retainage was synced net, shows the invoice as paid in full, so there is no receivable left to chase and no report it appears on. The release depends on closeout documents that are somebody else's problem. Meanwhile lien deadlines pass. The money does not get written off in a decision, it just quietly stops being collectible. A retainage schedule with a named owner and a release date on every open balance is the only thing that prevents it.

When the contract says, which usually means at substantial completion, after punch list is signed off, and once final lien waivers, warranties, as-builts and closeout documents have been delivered. Many contracts also step the percentage down at a milestone, for example from 10 percent to 5 percent at 50 percent completion, and Procore will not do that automatically. Read your specific contract. Retainage is rarely withheld because the owner is difficult; it is usually withheld because a closeout document is missing, often from a subcontractor whose own retainage you are still holding.

It can, and it is a frequent reason WIP refuses to tie out. Billings to date is one of the two inputs to the over and under billing calculation, so if you record billings net of retainage on some jobs and gross on others, your over and under numbers are wrong. Consistency matters more than which convention you choose. The clean approach is to bill gross, treat the withheld amount as a balance sheet asset, and keep billings to date on a gross basis across every job.

Often, yes. If you recognize revenue on the percentage-of-completion method, which most contractors on long-term contracts are required to use for tax purposes, income is recognized as the work is performed regardless of when the cash arrives, and retainage receivable is generally inside that recognized income. So you can owe tax on money you have not been paid. There are exceptions, including the small contractor gross receipts exception, home construction contracts and short-term contracts, and the threshold is indexed for inflation. This is worth a real conversation with your CPA before year end, and it is impossible to plan for at all if retainage is not visible in your books.

We set up dedicated retainage receivable and retainage payable accounts, split current from long term, and make sure billings post gross with the holdback journaled correctly instead of vanishing into a net invoice. Then we reconcile the retainage register to Procore every month, job by job, and age every open balance against its contractual release date rather than its invoice date. The output is a report that tells you exactly how much you are owed, on which jobs, and what is blocking each release. FinTruction is based in Coppell, Texas, and works remotely with commercial general contractors and specialty subcontractors across the United States.