Examples of How Retainage is Calculated Over the Life of a Project
How retainage is calculated depends on whether you are generating the first invoice for a project, a subsequent invoice, or an invoice generated after the retainage limit is reached.
Assume that retainage is 10% of total billings, with a retainage limit of $10,000.
First Invoice
This is your first invoice for the project. Current billings are $5,176.00.
| First Invoice | |||
|---|---|---|---|
| Current Retainage | $517.60 | (10.00% of $5,176.00) | ($517.60) |
| Retainage-to-date | $517.60 |
The retainage-to-date amount is equal to the current retainage plus the prior retainage. Since this is the first invoice for this project, prior retainage is zero and the retainage-to-date amount is equal to the current retainage.
Second and Subsequent Invoices
On second and subsequent invoices, DPS displays an additional section on the invoice, Prior Retainage. The Prior Retainage amount is equal to the outstanding retainage amount on all previous invoices generated for the project.
Assume that this is the second invoice, and current billings are $7041.97.
| Second Invoice | |||
|---|---|---|---|
| Current Retainage | $704.20 | (10.00% of $7,041.97) | ($704.20) |
| Prior Retainage | $517.60 | ||
| Retainage-to-date | $1,221.80 | (Limit $10,000.00) |
The retainage-to-date amount is equal to the current retainage plus the prior retainage ($704.20 +$517.60 = $1,221.80).
When the Retainage Limit is Reached
When the retainage limit is reached, no further retainage amount is withheld.
| When Limit is Reached | |||
|---|---|---|---|
| Current Retainage | $1,975.81 | (10.00% of $23,656.49) | ($1,975.81) |
| Prior Retainage | $8,024.19 | ||
| Retainage-to-date | $10,000.00 | (Limit $10,000.00) |
In this example, although current retainage should be $2,365.65 (10.00% of $23,656.49), this amount cannot exceed $1,975.81, or the limit would be exceeded.
The retainage-to-date amount is equal to the current retainage plus the prior retainage. After the limit is reached, this section displays the limit amount.
After the limit for retainage is reached, all subsequent invoices only show the retainage-to-date amount.
| Retainage-to-date | |||
|---|---|---|---|
| Retainage-to-date | $10,000.00 | (Limit $10,000.00) |
The Current Retainage and Prior Retainage sections no longer appear on the invoice, because retainage is no longer being applied to this project’s invoices.