26th February 2014

Subcontractors forced to accept two-year wait for retention money

Payment for contractors and subcontractors in the construction industry isn’t just held up by late payments, but also by lengthening retention payment periods.

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Late payment issues set to continue in 2014If late payments weren’t enough of an issue for contractors and subcontractors in the construction industry, now they’re also forced to accept increasingly lengthy periods before they can receive full payment for their services. Some of the UK’s largest construction contractors are now forcing their subcontractors to accept a 24-month wait for retention money after work is completed.

Retention money is a cut of the contract payment, which is withheld and then released once certain conditions are fulfilled. In most cases, a percentage of the contract is paid once the work is completed, with the remainder retained until these aforementioned conditions are met. Retention periods can now be measured in years, causing significant cashflow issues for subcontractors.

The story was first broken by Building.co.uk, with many subcontractors complaining that narrow profit margins in the construction industry make retention periods practically untenable. Firms often stand to make only single figure percentage profits on their contracts, so if their clients choose to withhold a similar amount for two years, their cashflow is bound to suffer.

Whilst a 12-month retention period is standard in the construction industry, the now established 24-month retention period presents a serious obstacle to contractors. Coupled with the construction industry’s continued problem with late payments, it’s no surprise that subcontractors are suffering from cashflow issues.

To improve your cashflow management, construction industry-specific accounting software can help you keep track of your retention payments. Construction accounting software keeps a clear record of all the payments you receive (and expect to receive), so it’s easy to know when to chase up your clients for retention money.


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