Construction Holdbacks: How to Record Them in Your Books
If you invoice construction work in Canada, someone is usually holding a percentage of the bill until the job is clear of liens. That money is still yours. It is just not in your account yet.
Do not book it as a write-off
A holdback is not:
- A discount you gave
- A bad debt
- A reason to understate the invoice
It is a receivable. The invoice is the full amount. The holdback sits as an amount waiting on lien expiry or substantial performance — whatever the contract and the provincial builders' lien rules say.
Why the slip matters
Progress invoices, deposits, and holdback releases look similar in a photo pile. They are not the same entry.
- Progress invoice: work done this period
- Deposit invoice: money before the work
- Holdback release: the bit that was held, now due
If those get typed in as ordinary receipts, payables and GST get messy. Keep the original invoice. Note the holdback line. When it releases, that is a collection — not new revenue.
This is not legal or tax advice. Read the contract and the lien act in your province.