Retainage

Retainage is the process of paying for a portion of an invoice and retaining a specified amount until a project milestone is completed. It is common to have multiple invoices with retainage. The first retainage amount should be large enough to ensure that the project can be completed if the vendor is unable to finish it.

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