Retention money is the payment contractors earn and then wait for. Typically five percent of every certified amount is held back, with half released at completion and the rest after the defects period. On paper it is a simple security arrangement. In practice it is one of the largest receivables on a contractor’s books, and one of the least tracked.
Ask a commercial team how much retention is currently held across all projects, by which clients, and when each amount falls due. On most projects the answer takes days to assemble, and it is rarely complete.
Money nobody is tracking is money nobody is chasing.
Retention does not usually vanish in one event. It fades. The project reaches practical completion, the site team moves to the next job, and the first half of the retention depends on a certificate someone has to request. Twelve months later the defects period ends, and the second half depends on a final certificate that nobody has calendared.
By then the project manager has changed, the client’s consultant has moved on, and the snag list that blocks release lives in an email thread from last year. Each month of delay makes the claim weaker and the effort to recover it larger.
Meanwhile the contractor is holding retention on its own subcontractors. If that side is better tracked than the client side, cash flows out before it flows in.
Bonds add another layer. Some clients accept a retention bond in place of cash retention, which frees working capital but brings its own expiry dates and release conditions. A bond that lapses unnoticed, or one that is never returned after release, is a cost the business pays in bank charges without realising it.
The problem is well documented. Research on retentions commissioned by the UK government found that 71 percent of contractors holding retentions had experienced delayed release over three years, with delays of several months at each tier and some running beyond a year. More than half reported full or partial non-payment.
The same study found that retentions push up overheads through the time spent chasing them and the borrowing needed to cover the gap, and that some contractors raise their tender prices to compensate. The market is different, but contractors in the UAE and KSA will recognise every one of those patterns.
Five percent sounds small until it is multiplied across a portfolio. A contractor with several completed projects in their defects periods can have a meaningful share of its annual margin sitting with clients, earning nothing and slowly becoming harder to collect.
That cash has to come from somewhere. It comes from overdraft facilities, delayed supplier payments, or slower payments to subcontractors, which feeds the same disputes we covered in why subcontractor payment disputes start long before the invoice.
It also distorts how project profitability looks. A project that delivered its margin on paper can still be cash negative for two years after handover. If retention is not visible in the numbers, the business cannot see which projects actually paid.
The fix is treating retention as a receivable with a due date, not a footnote on the final account. Every certified amount records the retention held, the client, the release conditions and the expected release dates. Completion and the end of the defects period trigger reminders before they arrive, not after. The commercial team sees one view of retention held and retention owed, by project and by client.
The same view on the subcontractor side shows what the contractor owes, so release on both sides can be matched rather than managed in separate spreadsheets. It is the same discipline that stops construction projects from going over budget: visibility before the problem, not reconstruction after it.
That is what construction ERP looks like when retention runs through it. Mismar works with contractors across UAE and KSA to track every retention from certificate to release. If your retention position takes days to assemble, let’s get on a call.
Start growing with Mismar today.
