Two jobs show the same $140,000 unpaid on the aging. On one, the owner certified the draw and missed the payment date. On the other, the architect sent the application back for missing backup two weeks ago. The first is a collections call. The second is a billing fix, and calling the owner about it wastes a favor you may need later.
Construction AR does not behave like a normal customer ledger. A large share of the balance is often money the owner has every contractual right to hold, or money that cannot be paid until something on your side is fixed. A collections process that sorts by days outstanding will spend its time on the wrong balances. Sort by what has to happen next instead.
See how much is retainage: the DSO calculator shows DSO with and without retainage held under contract.
Classify every open amount by draw status
Each open amount on a construction job sits in one of a handful of states. Each one has a different owner and a different next action.
| Status | Who acts next | Next action | Measure |
|---|---|---|---|
| Application returned | Project billing | Fix the rejection and confirm resubmission | Days from rejection to resubmission |
| Awaiting certification | Project manager | Check what the reviewer still needs | Days from submission to certification |
| Certified, not yet due | Nobody yet | Record the due date | None |
| Certified, past due | AR / collections | Confirm the owner’s payment date and record the commitment | Days past due; promises kept |
| Short-paid with a backcharge | Project accountant | Check the claim against contract and job records | Days from claim receipt to decision |
| Retainage held | Closeout owner | Check what must happen before it can be billed | Days from eligibility to billing |
| Retainage billed | AR / collections | Confirm submission, acceptance, and due date | Days past due |
| Unapplied deposit | Cash application | Confirm allocation from the remittance | Days unapplied |
Only two rows belong to collections. The rest belong to billing, project management, or closeout. Your aging report should be able to show each group separately, and each item should carry its job, draw, amount, and next action.
AIA’s G702 is both the contractor’s application and the architect’s certificate for payment (AIA’s sample G702). Save the requested amount, the certified amount, and any reason they differ. If your contract uses another form, capture the equivalent approval. For each certified amount, record the acceptance date and the contract’s payment term. The collector needs both to explain why the invoice is due.
Record the date each status began, and keep history. A draw returned twice should show both returns. That is how you find out the same missing document keeps holding up billing on the same job.
Separate held retainage from money you can chase
Retainage held is not overdue. Retainage billed and unpaid can be. Mixing them makes your aging look worse than it is and sends collectors after money the owner is entitled to keep.
If a job statement shows one open total, tie the full balance to the ledger and label the subset currently due. For the held portion, save the amount and the reason it remains held. A collector should be able to trace any amount to its source without assuming a progress bill is delinquent. The lifecycle from held to billed to paid is covered in the construction retainage guide.
Applying a payment that covers more than one job
An owner sends one check for two projects. The remittance lists both draws, but one is short.
Worked example: a two-job payment (illustrative)
| Job | Certified draw | Remittance designates | Difference |
|---|---|---|---|
| 101 | $85,000 | $85,000 | $0 |
| 205 | $62,000 | $55,000 | $7,000 |
| Total | $147,000 | $140,000 | $7,000 |
Put the cash on the jobs and draws the remittance names: $85,000 to Job 101 and $55,000 to Job 205. Do not spread the shortfall across both. Then work the $7,000 on Job 205. Is it retainage the application already provided for, a backcharge, or a balance the owner still plans to pay? Each answer goes to a different person.
If part of a remittance is unclear, hold that amount in unapplied cash under your review process until AR confirms it. Check the job balances after posting. A payment can tie to the bank while leaving the wrong draw open. For the general mechanics, see unapplied cash and remittances and customer deductions and short pays.
Getting the right view out of your ERP
Most construction systems can show aging by job. The details that trip people up are deposits, retainage columns, and which date drives the aging bucket.
CMiC: deposits and the aged report
In CMiC’s Accounts Receivable Aged Report (AR1000D), you set the aging and cutoff dates, select invoice detail, and can group by job when reviewing a draw. Run the same scope grouped by customer for the account review, and record the company and filters with each extract. CMiC distinguishes Show Deposits, which controls whether deposits display, from Include Deposits, which controls whether the outstanding total includes them (CMiC Aged Report documentation). Hiding the deposit lines may leave the total unchanged. Reconcile the report to the ledger before using it for DSO.
Vista: where released retainage lands in aging
Trimble documents that released retainage transactions appear in Vista’s Aged Analysis columns according to the invoice or due date assigned to the transaction, with a corresponding reduction in the retainage due column (Trimble AR Company Parameters field definitions). So when a release posts, a balance can appear to jump into an older bucket overnight. Before calling the owner, check which transaction moved, which date it carries, and whether the release request actually went out.
FOUNDATION: job aging plus cash receipts
FOUNDATION lists job-level AR aging and retainage reporting, along with cash receipts reporting by account (FOUNDATION construction software guide). Use the job report to find the draw and the receipts report to check the cash record, then compare both with the remittance and the last certified application.
Sage 300 CRE: held and billed are different records
Sage documents different adjustment procedures for retainage held and for an invoice for retainage already billed (Sage’s guidance on adjusting retainage held). Keep both states visible in the collections review, and before correcting a balance, have the project accountant confirm which record you are looking at.
Measure DSO with and without retainage
A single company-wide DSO mixes money you can collect with money the owner is entitled to hold. At minimum, calculate it two ways and document which one you report.
Worked example (illustrative)
| Item | Amount |
|---|---|
| Total AR at quarter end | $2,400,000 |
| of which retainage held | $520,000 |
| of which retainage billed | $80,000 |
| Billings for the quarter (90 days) | $3,600,000 |
- DSO on total AR: $2,400,000 ÷ $3,600,000 × 90 = 60 days.
- DSO excluding held retainage: ($2,400,000 − $520,000) ÷ $3,600,000 × 90 = $1,880,000 ÷ $3,600,000 × 90 = 47 days.
The 13-day gap comes from contract terms, and collectors cannot shorten it. If you report 60 days to a lender or board without explaining that, someone will ask collectors to fix something they cannot touch. Keep billed retainage in the second figure: once billed, it is collectible.
Two more measures help more than DSO itself. Track time in each status from the table above, by job, so you can see whether cash is waiting on the owner or on you. And compare payment timing only across draws at the same stage and with similar terms. A benchmark built from your own completed billing cycles on comparable projects is more useful than any industry number. For the company-wide calculation and forecasting, see DSO and cash forecasting. For the general aging review, see collections aging review.
Run the weekly AR review by status, not by customer
A weekly review organized by customer puts the PM, the billing lead, and the collector in a room to hear about one another’s problems. Run it by status instead. Start with certified and past due: the collector reports the owner’s payment commitments and any promises missed. Then returned applications: project billing reports what was fixed and when it went back. Then backcharges: the project accountant reports decisions made and claims still open. Finish with retainage that became eligible for billing since the last meeting. Each person leaves with their own list, and anything that has not moved since the previous week gets a named owner and a date.
What goes wrong
- Calling about an uncertified draw. The owner cannot pay what the architect has not approved.
- Held retainage in the 90+ bucket. It looks delinquent and is not.
- A release jumps buckets. Released retainage carries an old date and appears overdue the day it is billed.
- A deposit hides an unpaid draw. The customer total looks fine; the job is still open.
- Multi-job payments spread evenly. The shortfall lands on the wrong job and both draws stay wrong.
Test one job before next close
Pick one job with a late progress bill, a deduction, and retainage. Ask someone outside the project team to trace each open amount to its application, its status, its owner, and its next action, using only the records in your system. If they need a spreadsheet or an email thread to do it, attach that evidence where the review happens. Then review the same job next period and confirm the collector can say which amount cleared through payment, which moved because retainage was released, and which still needs a decision.