When you hold back part of each subcontractor payment, the held amount is retainage payable: a liability you owe but won’t pay until the subcontract’s release conditions are met, often including final lien waivers from the sub and its lower tiers and the owner’s release of the matching retainage. It’s tracked separately from regular accounts payable.
Why it matters
Retainage payable is real money you owe. Forgetting it makes the balance sheet look better than it is, and releasing it without final waivers risks paying twice if a lower-tier supplier files a lien.
Worked example
Summit Mechanical’s requisition (sample data) of $250,000 at 10% posts $225,000 to Accounts Payable and $25,000 to Retainage Payable. Later, a $120,000 sub retainage release posts Dr Retainage Payable / Cr Accounts Payable, once the final waivers from the sub and its two lower tiers are on file.
Common mistakes
- Recording sub bills net of retainage, so the liability disappears.
- Releasing retainage before the owner releases yours, when the subcontract says otherwise.
How os.construction handles it
In the accounting preview, retainage payable is withheld per bill line, tracked separately, and released, partially or in full, only with the required closeout waivers. See Accounts payable.