Accounts receivable (AR) is what you’ve billed but not yet been paid. For a contractor, most AR comes from progress billings, usually monthly pay applications, plus retainage receivable: the portion the owner withholds from each payment until substantial or final completion.
Why it matters
Construction companies run on thin margins and large cash swings. A job can be profitable on paper while AR ages past 60 or 90 days and drains working capital. Retainage receivable deserves separate tracking because it can sit for months or years and usually requires closeout documents, final waivers and punch list completion to release.
Worked example
On Riverside Medical Center, Pay App #9 bills $2,310,400 of work this period. With 10% retainage, the owner holds $231,040 and the current payment due is $2,079,360. Both amounts hit AR: $2,079,360 as current receivable, $231,040 added to retainage receivable. (Illustrative sample data.)
Common mistakes
- Lumping retainage in with current AR, which makes aging reports misleading.
- Confusing AR with under billing. AR is billed and unpaid; under billing is earned but not yet billed.
- Letting a rejected pay app sit instead of fixing and resubmitting it the same day.
How os.construction handles it
We’re building pay apps, AR and retainage on one record, so billing status, aging and retainage due are visible per job without a separate spreadsheet.