In construction and contracting, the holdback (or retainage) is typically 5-10% of each progress payment, held by the GC or owner until project completion and punch-list sign-off. A subcontractor completing $500,000 in work may only receive $450,000 during the project, with $50,000 held back. Chasing the holdback is often harder than collecting regular invoices because it's held deliberately under contract terms, not due to non-payment.

In business acquisitions and earn-out arrangements, a holdback is a portion of the purchase price escrowed until the seller meets specific post-closing conditions, usually tied to revenue targets or customer retention. In invoice factoring, the factor typically advances 80-90% of the invoice value and holds back the remainder (minus their fee) until the customer pays. The holdback protects the factor against non-payment by the end customer.

Managing holdbacks in your AR means treating them as a separate category from standard overdue invoices. They aren't "unpaid" in the traditional sense. The customer is withholding per contractual right, not refusing to pay. The collection approach is documentation-based: demonstrate that the release conditions have been met and formally request payment. For construction retainage specifically, a formal retainage release request letter combined with knowledge of your state's prompt payment laws works better than a standard demand letter.