Retentions, Deposits and Getting Paid on Time

You can do everything right on the build. Price it properly, run it tight, keep the client happy. And still go backwards, because the money turned up 6 weeks late, or a retention got stuck for a year, or a client decided your final claim was a negotiation rather than an invoice.

Getting paid is half the business, and it is the half most builders are softest on. We are good at building and bad at chasing, because chasing money feels awkward and confrontational. But the cash in your account is what keeps the doors open, not the cash you are owed. Let me walk you through the mechanics of getting paid on time.

Owed money is not real money

Start with the mindset. An invoice you have sent is not cash. A retention being held is not cash. A progress claim lodged but unpaid is not cash. None of it pays a subbie on Friday.

This is the gap between profit and cash that sits at the centre of the pillar on cash flow for custom builders. You can be owed $90,000 and still not make payroll. So the job is not just to be profitable, it is to convert what you are owed into money in the account, fast and reliably.

Deposits: your cleanest cash

The deposit is the best money on any job because it arrives before you have spent anything. In residential building the deposit you can take is often capped by law depending on the contract value and your state, so take the full amount you are entitled to within that cap. Undercooking the deposit means starting every job already behind.

I am an advisor, not your lawyer, so the deposit limits and contract rules that apply to you specifically should be confirmed with your own licensed professional. But within whatever applies, the principle holds: get the maximum legitimate deposit, because it is the cheapest cash you will ever have on the job.

Progress claims: speed is everything

Your progress claims are how the bulk of the money comes in, and the single biggest mistake builders make is being slow to lodge them. The stage finishes, and the claim sits in the ute for a week or 2 before you get around to it.

Every day a claim is unsent is a day you are funding the next stage with your own money. Lodge the claim the day the stage is complete. Same day. Have the paperwork drafted before the stage finishes so it is a 5 minute job to fire it off. This is the discipline that decides whether your draw schedule actually protects your cash, and it is why I treat your progress claims and draw schedules as your most important cash-flow tool. The finest schedule on earth does nothing if you are slow to claim against it.

Retentions: your profit, held hostage

Now the one that stings. Retention is a percentage of each claim, often 5 percent, that the client holds back as security, typically half released at practical completion and the rest at the end of the defects liability period, which can be 6 or 12 months later.

Do the maths on what that means. On a $600,000 build, a 5 percent retention is $30,000 of your money, and a big chunk of that is your profit, sitting in someone else's account for up to a year. That is a serious drag on your cash, and most builders just accept it and forget about it.

Do not forget about it. Two things. First, build the reality of retentions into how you price your builds and plan your cash, so you are not relying on money you will not see for 12 months. Second, diarise the release dates and chase the retention the day it is due. Money held in retention has a way of being quietly forgotten by the client, and an unclaimed retention is pure lost profit. The contract entitles you to it, so go and get it.

Slow payers: manage them ruthlessly

Some clients pay late by habit. Every week they stretch you, your cash gap widens and your stress rises. The way you handle this is not to get angry, it is to get systematic.

Invoice promptly and clearly, with the terms stated. Follow up the moment a payment is overdue, not weeks later. A polite, firm reminder on day one of being late sets the tone that you watch your accounts and you expect to be paid on time. Builders who let the first late payment slide teach the client that late is fine, and it only gets worse from there.

This matters for which jobs you take in the first place, too. A client who haggles hard and pays slow is one of the clearest markers of an unprofitable job, which is why I flag payment behaviour as a warning sign in spotting unprofitable jobs. The best way to avoid a slow-payer problem is to be choosier about who you build for.

Security of payment: know your rights

Every state and territory has security of payment legislation designed to help builders and subbies get paid, with formal processes for making a payment claim and, if it is not paid, escalating to adjudication. These laws exist because slow and non-payment is endemic in construction, and they are a genuine tool when a client digs in.

This is firmly in legal territory and not my lane. I am an advisor, not your lawyer, so the specifics of how security of payment works for you, the strict timeframes involved, and how to make a valid claim must be confirmed with your own licensed professional. What I want you to know is that the protection exists, the timeframes are tight and unforgiving, and a builder who understands their rights is far harder to stiff than one who does not.

Get paid, then you can pay yourself

Here is why all of this matters beyond just survival. You cannot pay yourself a proper, consistent wage if the money lands late and lumpy. Reliable collection is what lets you take a steady wage off the top instead of riding the rollercoaster of each delayed claim, which is the whole point of paying yourself a proper wage.

Tight collection is not about being hard-nosed for its own sake. It is what turns a profitable-on-paper business into one with money actually in the bank, which is the only kind that survives.

The foundation under all of it is charging enough in the first place, because no amount of chasing fixes a job that was underpriced. The free Charge-Out Calculator makes sure your rate genuinely covers your costs. And if late payments and stuck retentions are squeezing your cash right now, the free numbers check is where we map exactly where the money is getting held up and how to get it moving.