How to Set Up a Construction Draw Schedule With Retainage

The estimate decides whether a job is profitable. The draw schedule decides whether you can afford to finish it.

These are separate problems, and contractors who have solved the first frequently lose sleep over the second. The worked remodel used throughout this series carries $35,277.40 of gross profit on a $125,990.72 contract. It also requires you to pay a cabinet supplier, five subcontractors and a crew, on their terms, while collecting on the client’s. A draw schedule is how those two timelines are reconciled — and retainage is the part of it that most often goes missing.

The Schedule of Values

Tie draws to milestones, never to dates and never to time elapsed. A milestone is something a client, a lender or an inspector can stand in the room and verify. “Week four” is not; “drywall complete and inspected” is.

Three things about those percentages are deliberate.

Draw one covers mobilisation, not “a deposit.” Demolition, the dumpster, protection and haul-off are real costs incurred in week one, and the first draw exists to fund them. A schedule that starts with a token deposit and waits for rough-in has you financing the first fortnight of the job out of your own account.

The percentages roughly follow where your costs actually land. Draw four is 25% because the cabinet package and the countertop sub are the single biggest cash event in the job. If your draw percentages are evenly spaced while your costs are lumpy, you will be cash-negative at a predictable point — and you can find out which point before you sign, not during.

The final draw is small, and it is small on purpose. Five per cent of $125,990.72 is $6,299.54, and it is the money you will be chasing while doing the least pleasant work on the job. Make the last draw large and the punch list becomes a negotiation. Make it small and it becomes a task.

What Retainage Actually Costs You

Retainage is not a discount. Every dollar of it is yours, eventually. But it is money you have already spent, sitting in someone else’s account, for months.

That last line is the one worth sitting with. Over a third of everything this job earns is withheld until after it is finished, while all of the cost has been paid. The job is not profitable on your bank statement until the retainage arrives — it is only profitable on paper.

And retainage compounds across jobs. Run four jobs of this size in a year and you have $50,396.28 of your own money parked with clients at various stages of release, permanently, as a condition of operating. That is a working-capital requirement nobody sends you an invoice for.

Two practical responses:

Mirror it downstream. If the client holds 10% of your draws until final completion, hold the same percentage on the same terms from your subcontractors. Pay your tile sub in full at rough-in while the client holds 10% of that same work from you, and you are financing their retainage as well as your own.

Negotiate the reduction, not the rate. Clients rarely agree to remove retainage. Reducing it at a defined point is a far easier ask — halving it at substantial completion, with the balance at final acceptance. On this contract that would release $6,299.54 weeks earlier, which is worth more to a small contractor than arguing the rate down from 10% to 8%.

The Four Places Retainage Stops Being Money

Every one of these is ordinary, and every one is a live balance that quietly becomes a write-off.

1. A draw raised and never invoiced. The milestone was hit, the schedule says $25,198.14 is due, and nobody sent the invoice because the crew moved straight to the next phase. There is no notification for this. The only thing that catches it is a schedule that shows claimed and invoiced as two separate states.

2. A paid draw whose retainage nobody released. Draw two was paid — the net $28,347.91 landed, everyone is happy, the job moved on. The $3,149.77 is still held, and it is now eight weeks old and mentioned in no conversation anywhere. Retainage on a paid draw is the easiest receivable in construction to forget, precisely because the draw looks settled.

3. An invoice sent and now overdue. Thirty days is the threshold used here. Without an ageing figure — days out, per draw — “they’re a bit slow” and “they are sixty-two days late” feel identical right up to the point where one of them is a serious problem.

4. Work in place that has not been billed at all. You are 80% through the job and 55% billed. That gap is not a scheduling quirk, it is $31,497.68 of completed work you have paid for and not invoiced. Billing behind the work is how a profitable job produces a cash crisis.

The through-line: all four are invisible unless the schedule tracks state rather than just amounts. Claimed, invoiced, paid, retainage held, retainage released, days outstanding. Six states, per draw. A spreadsheet that holds only “amount” and “date” cannot tell you any of it.

A Draw Request That Gets Paid

Whatever the contract requires, these five make the difference between a payment and a query:

1. The milestone, named as the contract names it — not “work done to date”
2. Percentage complete this draw and cumulative, so the arithmetic checks itself
3. Gross, retainage and net on three separate lines — retainage buried inside a net figure is the fastest route to a disputed release later
4. Lien waivers from the subs paid out of the previous draw, if the contract calls for them
5. Photographs of the milestone, which cost nothing and shorten the approval conversation more than any other item on this list

And one thing not to do: never request a draw for work that is not actually complete because you need the cash this week. You will be asked to prove the milestone eventually, the client’s confidence in every subsequent draw is now lower, and you have spent your credibility on a timing problem the schedule should have solved.

Related Reading

• How to estimate a construction job — the pillar: the takeoff and pricing behind the $125,990.72 contract billed here.
• How much overhead to add to a construction bid — the per-hour recovery rate that made the price what it is.
• Fixed price vs time and materials — how the billing structure changes what you collect.
• How to bid a bathroom remodel — a smaller job, and whether six draws are worth it on one.

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Construction Estimating, Bid & Job Costing Spreadsheet — $19.99

The Draw Schedule tab is 120 rows of exactly the table above: draw, job, milestone, date, percentage claimed, gross, retainage percentage, retainage held, net payable, invoiced, paid date, retainage released, retainage outstanding, days out and status. Your retainage rate comes from Settings and can be overridden per draw. Retainage stays on the books until you mark it released — because retainage nobody chases is a discount nobody agreed to.

The four failure modes on this page each have a flag. An invoice sent and now past your overdue threshold. A draw raised and never invoiced. Retainage on a paid draw that nobody released. A job billing behind the work already in place — which the Jobs tab catches by comparing billed percentage against earned-to-date.

Around it: Bid Estimator and Bids and Win Loss producing the contract value in the first place; Overhead and Burden working out your recovery per billable hour; Jobs measuring profit at completion with cost to complete and margin slip against bid; Job Costs keeping committed apart from incurred; Change Orders raising the contract only when approved; Subcontractors with contract value, W-9 on file and insurance expiry; Materials, a 26-week Schedule, and a Dashboard reporting retainage still held, work done but not billed, and invoices out past due as headline figures rather than things you have to go looking for.

Fourteen tabs, 10,450 formulas, 32 integrity checks and a worked sample contractor already loaded. Works in Excel and Google Sheets. No macros, no add-ons.

Get the Construction Estimating, Bid & Job Costing Spreadsheet →