Subcontractors, Retention & Progress Billing in Saudi Arabia

Two things quietly decide a contractor's cash position: how you bill your client (progress and retention) and how you pay your subcontractors. Handled in spreadsheets, both leak money. Here's how to run them properly.

Progress billing and IPCs

Contractors rarely invoice a job in one shot. You bill interim payment certificates as work completes — percentage-of-completion or measured quantities — often net of advance recovery and retention. Each of those needs to become a correct, ZATCA Phase-2 compliant tax invoice with the right VAT treatment.

Retention — held and released

Clients hold retention (typically a percentage) until practical completion and the end of the defects-liability period. You do the same to your subcontractors. Tracking what's held, what's due for release and when — across dozens of certificates — is exactly the kind of thing a system should do for you, not a spreadsheet you forget to update.

Subcontractor payment certificates & back-charges

Every subcontractor payment should run through a certificate that references the subcontract, applies retention, deducts back-charges and advances, and posts the net to the project cost and the ledger. That keeps your job costing honest and your subcontractor relationships clean.

Why it belongs in your ERP

When client billing, retention and subcontractor certificates all sit on the same platform as job costing and finance, your cash-flow forecast is real, your VAT is correct, and month-end is calm. That's the difference an integrated construction ERP makes.