Tracking Retention

Retention is a common practice in the construction world.  Whether you’re a subcontractor invoicing a general contractor, or a remodeler billing a customer, you may find that 10% of the invoice will be withheld until the project (or your portion of the project) is complete and everything looks good.

A common question is how to account for the amount being withheld and keep track of it over a period of time.  With multiple invoices and multiple projects, it can add up!  Some use Excel, others pencil and paper.  But there’s an easier way.

One-Time Setup

  1. Create an Other Asset account for Retainage Receivable in your Chart of Accounts
  2. Create an Item for Retainage
    1. Type = Other Charge
    2. Code charge to a Retainage Receivable (Other Current Asset)
    3. Amount = -10%

Working with Retention

Now let’s say you are invoicing $25,000 but 10% ($2500) needs to be withheld.

  1. Create your invoice
  2. Add your Retainage Receivable Item
    1. Note: If you have multiple line items, you will need to subtotal before you add the Retainage item

      When you look at your balance sheet, then retainage due to you will be there – really nice when you have multiple projects going!
  3. Create a Retention Receivable Report
    1. Customers & Receivables>Customer Balance Summary or Detail
    2. Click on Customize Report –
      1. On the Filters tab, choose Retainage Receivable instead of Accounts Receivable
  4. At end of job, to invoice for the retainage due…
    1. Run the Retention Receivable Report created above to get the amount owed to you
    2. Then Invoice for the retainage due.
      1. You can use the Retainage Item as before, but change from -10% to the amount due
      2. Or create a new retainage Item, code to Retainage Receivable and leave the amount blank

It’s a similar process if you track Retainage Payable, but that’s for another day.

If you have questions or need help with this, let us know.

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