Outstanding Retainage

Welcome to the Community, @BatistaGrading24.

You can check out this thread about how to record retainage on a project. There are detailed steps and some accounting advice. 

If you need further assistance, please don't hesitate and leave me a Reply! I'm always here if you need me.

Ashley H,

I appreciate the link however for us, retainage is a percentage (normally 10%) that is held out of the invoice and is billed all at one time when the project is completed. We don't receive the funds and hold them to the side like a liability. 

I understand how to do retainage moving forward with invoices and QBO. This link helped me the most but it doesn't work for projects that we are finishing up and all that's left to bill is the retainage. We just switched to QBO and we don't want to record all the past invoicing and payments as it would throw off our bank account in QBO.

My question is specific to recording retainage when there are no invoices or small amount invoices (where the retainage amount would make the invoice negative). I originally recorded the retainage in its own invoice but that made my retainage receivable account negative. Thanks!

Ashley H,

Thank you for the link. However for us, retainage is a percentage of the invoice (normally 10%) that is withheld from the invoice and billed at one time upon completion of the project. This is not funds we receive and hold off to the side like a liability.

I understand how to include retainage in invoicing moving forward. This link helped me but it doesn't work for projects that don't have an invoice or one that would make the invoice negative (retainage is higher than the billable amount).

My question is specific to how to record retainage that I cant add into an invoice. I tried to make a retainage invoice but it made my retainage receivable account negative. Thanks!

Good Afternoon, is there a way to enter and reconcile retainage payables?

Hi there, @beiland.

I hope you're having a successful week. You can follow the steps mentioned in the thread that my colleague @Ashley H linked above to learn how to enter your retainage in QuickBooks. I'm linking it here again as well in case you need it. 

As for the reconciliation, you'll want to make sure the chart of accounts you created for your retainage in QuickBooks matches the transactions and amount in the bank account the retainage is coming from. This article about reconciliations will explain how reconciles work.

Feel free to comment below should you have any other questions or concerns. Enjoy the rest of your week!

Hello Batista,

We're on the same boat as you.  We too just migrated to QBO this year and have retainage prior to migration.  Did you ever get the resolution on this?  Let me know and thank you in advance.

Sincerely,

Gerardo

Let's fix the outstanding retainage, GerardoCorpuz.

You need to compare your financial statements after migrating from Desktop to Online. To do this, run the Retainage report in both products.

The report in Desktop and Online should be on an accrual basis. And, make sure to select ALL DATES to see the missing transaction. Once done, you can manually add the missing entry in QuickBooks Online to ensure the retainage is balance.

I suggest checking this guide to know what happened to your data when you moved from QuickBooks Desktop to Online.

If your reports still have issues, you can contact our Support Team. They can help forward you to our Data Services team to fix report discrepancies.

Stay in touch with me on how this goes by commenting below. I'm always right here whenever you need additional information about the outstanding retainage.

Hello Mary,

Thank you for the quick response.  Our issue is very similar to user (BatistaGrading24).  Prior to converting to QBO we have invoices that have a remaining balance because the unpaid portion is the retainage amount.  We billed the full amount to the client without accounting for the retainage so when you look at our AR Aging Report it looks like we have receivables that are uncollectable because they have been there for over a year.  We have a four year contract with this client and we're not going to be paid for the full the amount until the contract is complete. 

Recently I created a new account in our COA for Retainage as other current asset.  I then created an item category for Retainage and linked this to the new COA for invoicing clients/customers.  Yesterday I attempted to adjust one of those old invoices and move the balance to Retainage account I created.  I made two entries one is to reduce the revenue and the other to increase Retainage.  When I ran the Balance Sheet report the AR balance remained the same but the Retainage account has credit amount.  This is the scenario that user (BatistaGrading24) described. 

How should I transfer the balance from AR to Retainage for this Customer so it will reduce the AR balance and increase the Retainage balance?  Your assistance is greatly appreciated.

Thanks,

Gerardo

I appreciate the details you've provided, GerardoCorpuz.

Since you're transferring the A/R to retainage, you should use the A/R account instead of the revenue.

To get this straightened out, you can go back to your entries, and change the revenue account into A/R, choose the customer's name and link this transaction to your customer's open invoice.

I'll be sharing with you the following pointers below. This will provide you steps on how to link the journal entry to an invoice as well as on what are the rules you need to follow when entering a journal entry:

How to apply a journal entry credit to an invoice.

Adding Multiple AR/AP Lines on a Single Journal Entry.

Let me know the result of this troubleshooting in the comment below. I need to make sure this is resolved and you're back to running your normal business processing. Have a great rest of your day!

Hello Mary,

I am still not clear how to record my current invoice with retainage because it doesn't look right when I view in my Balance Sheet.  Will the line for retainer amount entered as positive (credit) or negative amount (debit)?

When I enter it as a positive (credit) here's the journal:
Account                                            Debit                               Credit
1200 A/R                                           52,177.50
4100-30 Service Income                                                          49,568.62
1205 Retainage                                                                            2,608.88

Total                                                   52,177.50                          52,177.50

Thanks,

Hello Mary,

I am still not clear how to record my current invoice with retainage because it doesn't look right when I view in my Balance Sheet. Will the line for retainer amount entered as positive (credit) or negative amount (debit)?
When I enter it as a positive (credit) here's the journal:
Account                                            Debit                        Credit
1200 A/R                                          52,177.50
4100-30 Service Income                                                 49,568.62
1205 Retainage                                                                   2,608.88
Total                                                  52,177.50                 52,177.50

Thanks,

Thank you for getting back to us and sharing the outcome of the steps you've performed, @GerardoCorpuz.

Let's fix this by creating a retainage item and use it to withhold the retainage from an invoice.

Here's how:

1. Select the Gear icon, then choose Products and Services.
2. Click New, then choose Service.
3. Enter the desired name.
4. Put a checkmark in the I sell this product/service to my customers box.
5. Tick the Income account drop-down arrow, then choose the Retainage account you've created.
6. Hit Save and close.

Then, use the invoice to withhold the retainage:

1. Navigate to the Plus sign (+) icon.
2. Choose Invoice.
3. Select the customer.
4. Fill out the invoice fields.
5. In the next available line of the invoice, pick the retainage item you've created.
6. From the RATE column, enter the amount of the retainage as a negative (-) number. If your retainage is a percentage, you must calculate this manually.
7. Hit Save and Close.

By making the retainage item amount negative, it will reduce the amount the customer owes, such as the amount you will collect from them.

Before doing the suggested steps, I suggest consulting your accountant prior to making any changes to your account. They can share appropriate steps for you to take to transfer the amount from A/R to retainage. If you don't have one you can use our Find an Accountant tool. 

Here's a great source where you can find articles that can help you in managing your books in QuickBooks, please visit our QBO help articles page. This includes topics such as reconciliation, track income, and expenses, run reports, etc. 

You can always get back to me here in the Community if you have any other questions about handling retainage in QBO. I'll always be around to help.