What Is Retention Money?

By Staff WriterLast Updated March 24, 2020

Retention money, according to BusinessDictionary.com, is payment for a service that is withheld until the completion of a condition, usually until all conditions are met by the buyer. For example, a manufacturing company can withhold money from a supplier until all machines are installed and working properly.

AccountingDictionary.org states that retention money is a part of a charge for work done by a contractor that is not paid until a period of time after the work is completed. This period allows for deductions to be made if the work proves to be poor. The withholding of payment can also act as an incentive for the work to be completed properly.