How do I handle retainage and progress payments in my financial records?
submitted by PhilNye

Sam Belkin

Retainage should be recorded as a receivable or payable, depending on the terms of your contract. It would be referred to as either "Retainage Receivable" or "Retainage Payable."

When progress payments are received they're recognized as revenue, which is a reduction of accounts receivable. This happens as the work progresses and certain criteria from the contract are met. When retainage is withheld, you should record it separately. When it's released, then you can recognize it as revenue or reduce the retainage receivable accordingly.

Julia_Gulia

When you get progress payments, you record them as income or cash received. The retainage is like a holdback, so you keep track of that separately. When the project is finished and the retainage is paid out, you update your records and recognize it as income. Just make sure to note the retainage as a separate amount until it's released.