ZigaForm version 5.5.1

Retention (Retainer or Retainage) on Jobs

By |2021-08-12T13:17:50-05:00August 11th, 2021|Comments Off on Retention (Retainer or Retainage) on Jobs
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Introduction

Some customers for certain types of construction projects require you to hold back a certain percent of your total invoice or of each invoice (invoicing only for only a portion of the contract price) until you’ve completed the job satisfactorily. After the job is complete and it’s agreed that you can collect the remaining percentage, you then create an invoice to the customer for the balance.

The procedure described here for handling retainage in Total Office Manager will not only help you track who owes your for retention, but also track how much they owe. In addition, it helps to track the retention on your books as an asset until the customer pays the balance.

Many construction related Total Office Manager users don’t record the income associated with the retention until it is billed. This is incorrect accounting since the income reported for any period should equal both the Net Due Balance on the invoice plus the Retention amount.

Please don’t confuse retention for down payments on jobs. Down payments are up-front initial payments made prior to the work starting. Retention is money withheld from you until the expiration of a certain time frame.

Setting Up For Retention Requires Two Simple Steps

  1. Create an Other Current Asset Account named Retentions Receivable
  2. Create an Other Charge type item named Retention, in the description field enter “Amount Deducted for Retention”. In the Amount field enter -10% (negative 10%) or an amount appropriate for you. Select the % radio button. In the Account field select the Retention Receivables Account you created.

Invoicing The Customer And Deducting Retention

Consider the following example:

Customer has agreed to a $50,000 job, with 10% retention to be held until the job is completed. If I am billing the customer 50% complete I would do the following:

  • Create an invoice for the customer for the $25,000 amount, if you have created an estimate you can generate the invoice from the estimate.
  • On the following line on the same invoice enter the Retention Item. The customer invoice now shows a negative $2,500 on this line, with a net due from customer of $22,500.

Note: If you have some invoice items not subject to retention (such as mobilization charges): Enter all items subject to retention, enter a sub-total line, then enter your Retention item. Follow with the remaining items that will not be subject to retention.

Reviewing Customer Retention Balance

When nearing the end of the job you will want to review your Retention Receivables account for that client.

  1. Go to Reports | Accounting | General Ledger and select the Transactions Details by Account report.
  2. Select the account you just create called Retention.
  3. Select an appropriate date range.
  4. Select correct Customer:Job.

Invoicing For Final Retention

After reviewing the retention balances in the Retentions Receivable Report,  create an invoice to the client.

Select the Retention item, remove the -10% (negative) item price and place a positive amount equal to the retention withheld from prior invoices in the amount column.

Your company now has a reduction in your retentions receivable account and an increase in the aging Accounts Receivable. Additionally, you now have an invoice to send to your customer.

Now your company has the correct amount of revenue in the correct accounting period and we haven’t lost track of the amounts withheld from prior invoices.

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About the Author:

HVAC Electrical Plumbing Software

Aptora delivers a true All-In-One services software solution including CRM, accounting, payroll, inventory, vendors, sales, marketing, dispatch, flat rate pricing, and more. NO 3rd party plugins or integrations required. Created by contractors for contractors, we know what it takes to grow your services-based businesses.

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