Transforming Retentions and Costings in Construction using AI and Analytics

The building and construction industry has always been one of the most complex sectors of the economy. With its mix of large-scale infrastructure, residential housing, commercial developments, and specialised trades, it brings together multiple contractors, subcontractors, suppliers, and regulators under tight timelines and strict compliance frameworks. From planning and design to execution and handover, every project involves thousands of moving parts. One of the most persistent challenges for businesses in this sector has been maintaining visibility over costs, retentions, and work in progress. Increasingly, artificial intelligence (AI) and analytics are emerging as the tools that can help.

Below we investigate about transforming retentions and costings in construction using AI and Analytics

At its core, construction bookkeeping is about more than just managing ledgers and payroll. It requires careful tracking of job costing, allocation of materials, subcontractor payments, and progress claims. Unlike many industries where transactions are straightforward, construction work often involves staged payments, retentions held back by principals, and adjustments tied to project milestones. This creates significant room for error if managed manually. Misclassification of costs, late recognition of liabilities, or missed release of retention monies can erode margins and create disputes. AI can step in to reduce that uncertainty by automating data capture and analysis across projects.

Consider job costing. AI-driven systems can link timesheets, equipment hire, materials purchases, and subcontractor invoices directly to specific projects in real time. This not only ensures that costs are captured accurately but also allows project managers to compare actuals against budgets continuously. Machine learning models can flag unusual variances — perhaps a sudden spike in material costs or delays in subcontractor billing — well before they distort profitability. The ability to track profitability at the project level helps businesses make sharper pricing decisions for future work and improves resource allocation across multiple jobs.

Retentions add another layer of complexity. These withheld payments, designed to ensure compliance and completion, can tie up significant cashflow. Mismanagement of retention accounts, GST attribution, or release dates can lead to legal risks and strained contractor relationships. AI can provide automated reminders for release timelines, model the impact of withheld funds on cashflow, and align retention balances with accounting standards. Analytics can further simulate different project scenarios — for example, showing how a delayed retention release across several contracts may affect the ability to fund new projects.

Work in progress (WIP) reporting is another area where AI is proving invaluable. Traditional cost-to-cost methods require careful manual calculation of how much of a job has been completed relative to contract value. AI can automate this by consolidating data from procurement, labour records, and site updates to provide a more accurate, real-time view of progress. This reduces disputes over progress claims and ensures that financial reporting reflects the reality of the site.

Beyond pure cost tracking, analytics also strengthens compliance. With legislation varying across states and frequent changes to construction standards, AI-enabled systems can flag when contracts, payroll awards, or tax treatments don’t align with regulatory requirements. For example, GST treatment under the margin scheme or classification of employees under different awards can be monitored by AI engines that compare entries against statutory rules, reducing the risk of costly audits or penalties.

In an industry where margins are thin and timelines unforgiving, the ability to rely on accurate, real-time financial insights is becoming non-negotiable. AI and analytics are not about replacing the expertise of bookkeepers, project managers, or contractors. Rather, they free them from the burden of chasing errors, reconciling inconsistencies, or worrying about missed deadlines. By doing so, they allow professionals to focus on what matters most: delivering projects on time, on budget, and at a sustainable profit.

For construction businesses, staying competitive will increasingly depend on embracing these technologies. Retentions, costings, and compliance will always remain part of the industry’s DNA — but with AI, they can be managed with a clarity and efficiency that was previously out of reach.

In this article, we explored transforming retentions and costings in construction using AI and Analytics. We highlighted how these tools can assist professionals in implementing best practices for cost management and transforming processes. If you're looking to strengthen your business in a climate of rising inflation and interest rates, now is a great time to explore what analytics can do for you and to contact us today. Our team specializes in helping businesses unlock efficiency and growth through tailored, data-driven solutions—whether it's optimizing pricing strategies, customizing service offerings, enhancing client relationships, tracking expenses, improving financial controls, or forecasting revenue. We're here to help you find the right approach we can work with you for your goals.