Retainage

Retainage is the process of paying for a portion of an invoice and holding back a specified amount until a project milestone has been completed. When using retainage, it is common to have multiple invoices that have retainage. The first retainage amount should be large enough to ensure that your project can be completed if the vendor is unable to finish the contracted work.

As the project reaches a milestone agreement or a certain complete percentage, the retained amount on each subsequent invoice is less. When the milestone or complete percentage is reached, funds are released from the previously retained amount.