Applications, Retainage and Back Charges Without the Month-End Surprises

Subcontractor applications for payment are where construction margin quietly leaks away. The claim comes in high, you certify part of it, retention is held back, more work lands the next month, a back charge crops up for damage — and three months later nobody can quite reconcile what the subcontractor is actually owed. The Subcontractor Billing module in The ERP Experiment is built to stop that.

Certify what's real, not what's claimed

A subcontractor's application for payment is a claim. Your job is to certify the value of work properly executed — which is often less. That's a partial certification, and it matters because everything downstream keys off the certified figure, not the claim. Hold retention on the claim and you've over-withheld; pay against the claim and you've over-paid. Construct365 always works from what you certify.

Retention that adds up

Retention (retainage) is withheld as a percentage of each certified amount. Across a job that means a series of small holds — 5% of this certification, 5% of the next — building into a retention pot. Then, usually at practical completion and again at the end of the defects period, you release it.

The trap is doing this by hand across partial certifications: it's easy to release too much, or lose track of what's still held. The module holds retention automatically every time you certify, tracks the running balance, and refuses to release more than is actually held.

Back charges, netted to the right place

When you levy a back charge — for damage, attendance or materials you supplied — it has to land somewhere specific. Net it against a single application and it reduces that payment; apply it at contract level and it reduces the contract overall. Either way it's its own line, and corrections are made by reversing, never editing, so the audit trail of what was charged, when and why stays intact.

Why the numbers reconcile

Retention is a timing device, not a reduction. You hold it back as work is certified and hand it back later. So once it's all released, the subcontractor's total net entitlement is simply total certified minus back charges — retention nets to zero. The module's roll-up is built around exactly that invariant, which is what lets it reconcile to the penny at month-end.

Anchored to your jobs

Every subcontract is raised against a job — and optionally a single cost code — from the Job Costing module, which remains the source of truth for contract values and cost. Subcontractor billing doesn't float off in its own spreadsheet; it sits on the same jobs and codes you're already tracking.

Everything in pence

Valuations, back charges and retention are tracked in whole pence rather than decimal pounds. Because retention has to net to zero once it is all released, even a sub-penny rounding slip would leave a balance that never clears — so the totals are kept as integers and foot exactly.

One subscription

Subcontractor Billing sits inside the one ERP Experiment plan. A single subscription covers it and every other module — there is nothing extra to buy when the next one lands.

👉 Visit the ERP hub, or learn why the accounting core comes last on purpose.