Retainage can lock up 5–10% of every job. Here's how Carolina electrical contractors should track it, bill it, and plan cash and taxes around it — from Division 26 CPA.
You finished the rough-in, passed inspection, and trimmed out the last device — but 5–10% of the contract is still sitting with the GC or the owner, sometimes for months after the job is done. On one project it's an annoyance. Stack three or four overlapping commercial jobs and retainage receivable quietly becomes one of the largest, slowest assets on your balance sheet. It's the number-one reason a profitable electrical shop can still feel broke.
Retainage (or "retention") is a percentage of each progress billing that the general contractor or owner holds back until the work is substantially or fully complete — and on some jobs, until they get paid by the owner above them. On commercial and public electrical work across North and South Carolina, 5–10% is typical. It's money you've already earned; you just can't touch it yet.
Your costs are front-loaded: wire, gear, switchgear and labor all get paid now. Retainage gets released last. That timing mismatch is the whole problem — and the fix isn't working harder, it's building your books and billing around the gap so it stops catching you by surprise.
Set up a dedicated Retainage Receivable account (and Retainage Payable for what you hold back from your own subs). At any moment you should be able to answer: how much retainage is outstanding, on which jobs, and when is each piece due? Tie it to your work-in-progress schedule so over- and under-billing is visible instead of hidden. If your books can't answer those questions today, that's the first thing to fix — it's core to our job costing & WIP reporting and bookkeeping work.
Invoice retainage the moment you hit substantial completion — don't wait to be reminded. Put each contract's release date on a calendar and follow up. And know your mechanic's-lien deadlines in NC and SC, so a slow-paying GC never turns earned retainage into a write-off.
This is where a lot of electricians get surprised. How retainage is taxed depends on your method of accounting and the type of contract:
The point isn't the rule itself — it's that the right method and structure can keep you from paying tax on money you haven't collected yet. That's a year-round planning conversation, not an April one. See business tax planning & strategy.
While retainage is outstanding, you still have to make payroll. The usual levers: a line of credit sized to your outstanding retainage, front-loaded mobilization or billing where the contract allows, and a rolling 13-week cash forecast so you see the squeeze before it arrives. That forecasting is part of our fractional CFO work.
Retainage is a timing problem, not a profitability problem — and timing problems are solvable once your books, your billing, and your tax plan are built for them. If you can't say how much retainage you're carrying right now, start there.
Book a consultation and we'll map your retainage, your cash gap, and the tax treatment that fits your shop.
This article is general information, not tax advice; please consult a CPA about your specific situation.
