AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Retention is a share of each payment the client holds back until the work is complete and defects are fixed; a study of Nigerian residential projects found 5% the most common rate. Variations are changes to the agreed work and are paid only if instructed and recorded properly, so get every change in writing before you do it.
Retention and variations are where small contractors most often lose money they have earned. Retention is easy to forget once a job is finished; variations are easy to do on a verbal instruction and hard to get paid for later. Both come down to what the contract says and what you can prove.
How retention works
The client deducts a percentage from each interim payment and keeps it as security for defects. The total retained builds up over the job and is released at stages set by the contract.
There is no single statutory rate in Nigeria for private contracts; the contract sets it. A study of residential building projects in Lagos, Ogun, Abuja and Port Harcourt found that 5% of project cost was the most commonly deducted retention. The same study found the main problems for contractors were delayed release, reduced fees and reduced profit where retention was used to fix defective work.
Worked example
Example: a ₦25,000,000 contract with 5% retention, released half at completion and half at the end of a defects period stated in the contract.
| ₦ | |
|---|---|
| Total retention held by completion (5% of ₦25,000,000) | 1,250,000 |
| Released at completion (half) | 625,000 |
| Released at end of defects period (half) | 625,000 |
Check whether your contract releases retention in one sum or two, and what event triggers each release: practical completion, a certificate of making good defects, or a fixed date.
Protecting your retention
- Before signing: agree the rate, a cap (for example, retention stops once it reaches a set total), the release events and the defects period. The study found contractors favour interest on retention paid late, and alternatives such as performance bonds, escrow accounts or letters of credit. Raise these at negotiation, not after.
- During the job: record retention deducted on every certificate in a retention ledger by job.
- At completion: request the completion certificate in writing, then invoice for the first release.
- Defects period: respond to defect notices in writing, fix them, and get sign-off. Diary the end date.
- Final release: invoice on the due date, attaching the sign-off.
Variations: what they are and how to claim them
A variation is any change to the work in the contract: extra rooms, a different finish, a moved wall, an omission. Check your contract for who may instruct a variation and how it is valued; many contracts value variations from the rates already in the bill of quantities.
- Get it in writing first. A site instruction, letter, email or WhatsApp message from the person with authority, describing the change. A verbal "go ahead" is the start of a dispute.
- Price it before you build it where you can, and get the price accepted.
- Record the work: photographs before and after, labour hours, materials used and delivery notes.
- Claim promptly with the next valuation, citing the instruction.
- Track time: if a variation delays the job, say so in writing at the time.
Electronic messages can be used as evidence in Nigerian courts under the Evidence Act 2011, subject to the conditions in section 84, and the Act recognises electronic signatures. Save and back up instructions; do not rely on the chat staying on one phone.
| Example variation register | Entry |
|---|---|
| Variation number | V-07 |
| Instruction | Email from client's architect, 4 Aug, extra 1.2m parapet wall |
| Priced at | ₦480,000 (from BoQ blockwork rates) |
| Accepted | Email reply, 6 Aug |
| Claimed in | Valuation 5 |
| Paid | Pending |
When the client will not pay
Start with a written demand setting out the amount, the instruction or certificate it rests on, and a deadline. Some construction contracts require disputes to go to adjudication or arbitration first, so read the dispute clause before going to court. For smaller sums in Lagos, the Small Claims Court hears liquidated money claims up to ₦5,000,000, after a letter of demand on Form SCA 1 giving 14 days.
Our guides to recovering an unpaid invoice, construction cash flow and what to put on an invoice cover related steps. This is general information, not legal advice.
Retention in subcontracts
If you are a main contractor, you may hold retention from your own subcontractors at the same time as the client holds it from you. Record both in the retention ledger, and agree in each subcontract when their retention is released. Clauses that make the subcontractor wait until the main contractor is paid shift the client's delay onto the smallest firm, so read them carefully before signing, whichever side you are on.
Where Pryme fits
On a Pryme Business Account, the Finance agent can keep a retention ledger by job and prepare a reminder when a release falls due. A person approves anything that goes to the client, and every action is recorded.
Questions people ask
What percentage is retention in Nigerian construction contracts?
The contract sets it. A study of residential projects in Lagos, Ogun, Abuja and Port Harcourt found 5% of project cost the most common rate.
When should retention money be released?
At the events the contract names, often partly at completion and the rest after the defects period. Invoice for each release in writing.
How do I claim for extra work on a building project?
Get a written instruction from someone with authority, price the change, record the work with photos and quantities, and claim it with the next valuation.
Is a WhatsApp instruction valid for a variation?
It can be evidence, since the Evidence Act admits electronic records under section 84. Whether it satisfies your contract depends on who sent it and what the contract requires.
Sources
- Managing retention in residential building projects in selected states in Nigeria (CORE) · accessed Oct 2026
- Lagos State Practice Direction on Small Claims Court 2023 · accessed Oct 2026
- Electronic and digital evidence: admissibility of e-signatures in Nigeria, Mondaq (9 Dec 2021) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.