Retention money
What is Retention money? A share of each progress bill that the client holds back until the defect-liability period, the time in which you must fix faults, ends.
In plain words
your client keeps back a small share of every bill as security that you will finish the job and fix any faults. That held-back share is retention money.
You have earned it, but you receive it only when the contract says so, often in parts.
A worked example
| RA bill | Certified | Retention at 5% | Paid now |
|---|---|---|---|
| Bill 1 | ₹30,00,000 | ₹1,50,000 | ₹28,50,000 |
| Bill 2 | ₹40,00,000 | ₹2,00,000 | ₹38,00,000 |
| Bill 3 | ₹30,00,000 | ₹1,50,000 | ₹28,50,000 |
| Total | ₹1,00,00,000 | ₹5,00,000 | ₹95,00,000 |
Suppose the contract releases half on completion (₹2,50,000) and the rest after the defect-liability period ends. The split and the length of that period are set by your contract. Sample numbers.
Why it matters
- Cash. ₹5,00,000 on a ₹1 crore job is working capital you do not have. Across several jobs it adds up.
- Deadline. Miss the end of the defect-liability period and the release can slip for months.
- Risk. Releasing too much too early, on either side, is money that is hard to get back.
How Kinnow handles it
Kinnow tracks every rupee held and warns before the release date.
- Held on every bill. The project's retention rate is applied to each RA bill, and a second share can be held for the defect-liability period.
- Two parts. One part is released on completion. The other is released only after the defect-liability period ends, unless someone marks an early release on purpose.
- A ledger. A retention ledger shows what is held, released and still outstanding, by bill and by subcontractor. Releasing more than is held is refused.
- A date to watch. Handover starts the defect-liability clock from the project's agreed months. A daily check warns as the end date nears, and a register lists projects by end date.
- In the accounts. Retention sits as a separate receivable, or a payable on a subcontractor's bill, so it never shows as an overdue debt.
The honest limit. Kinnow records and warns. Raising the release claim and getting the client to pay are still your process. Your CA confirms how GST and TDS apply to retention.
Show us your open projects and their retention terms. We will build the ledger.
In Kinnow
Related terms
- RA bill: where retention is deducted.
- Accounts receivable ageing: where retention should not appear as overdue.
- Cash-flow forecast: when retention will come back.
Questions
Is retention money the same as a security deposit?
Both are security. Retention is held back out of each bill as work progresses, while a security deposit is usually paid in one amount at the start. Your contract says which applies.
When do I get my retention back?
As your contract says. Often part is released on completion and the rest after the defect-liability period. In Kinnow, the defect-liability part is released only after that period ends, unless an early release is marked on purpose.
Does retention show as overdue in my ageing?
Not in Kinnow. It is carried as a separate receivable, because it is held under the contract and is not a late payment.
Request a demo and we will show retention held, released and due, project by project.