Retainage

Retainage refers to the amount withheld from the vendor until a certain percent of a project is completed. This allows the payer to retain an amount to complete the project if the vendor does not deliver the contracted work.

Generally, as the project reaches a certain percentage completion, the amount withheld on each invoice lessens.

Retainage is a component of Contract Management that interfaces through a vendor agreement or purchase order set up to specify amounts to be retained.

During the match process for purchase orders or vendor agreements flagged for retainage (release process for drop ship and service level agreements), the invoice and distribution records are updated with the retainage information. The payment record is split into two separate payments: one for the invoice amount less retainage (paid per invoice terms), and the other for the retainage amount that is placed on hold until it is manually released.