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Senior Explorer *

Client retainer (invoicing and payments)

My client invoices monthly for retainers.  On the same invoice she also includes a donation-in kind of 2 hours of her time for non-profit clients.  Payments are received against the retainer invoice.  We then create another invoice that bills actual time and then last line is a deduction for the retainer to zero the invoice.  The donation is not recorded again on an invoice, but it was needed on the original to reduce the amount owed by the client.  My question is with the donation, is this the proper way to account for it?  This procedure seems to zero out the retainers fine, but I'm not sure if it's taking into account the donation of time she wishes to give.

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Best answer 05-25-2019

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Established Community Backer ***

Re: Client retainer (invoicing and payments)

@tlh121018 

 

The issue is the first invoice, sorry I seem to have misunderstood the work flow

the first invoice, the retainer discount, should also post to the retainer liability account

then on the final discount, you enter the 2-hour sales discount

Senior Explorer *

Re: Client retainer (invoicing and payments)

For clarity to others who may read this thread, this is my new workflow:

1st Invoice:

Retainer  10hrs x $120 = $1200 (liability)

Retainer (in-kind donation) -2hrs x $120 = -$240 (liability)

Total Invoice = $960

 

Receive payment = $960

 

2nd Invoice:

Services (actual time) 10hrs x $120 = $1200 (income)

In-kind donation -2hr x $120 = -$240 (discount)

Retainer (less amount received) -$960 (liability)

Total Invoice - $0

9 Comments
Moderator

Re: Client retainer (invoicing and payments)

Welcome back to the Community, @tlh121018.

 

To ensure I can provide the best information, may I know what you're referring to as the actual time when you created another invoice? It would be helpful if you share additional details of the process.

 

In the meantime, here's an article that tackles recording a retainer in QuickBooks Online (QBO) for more information: How to record a retainer or deposit.

 

I'm looking forward to your response, @tlh121018. I want to make sure this is taken care of for you.

Senior Explorer *

Re: Client retainer (invoicing and payments)

The retainer is billed based on an estimate of the time it will take to perform the work during the month.  She then keeps track of her time on QBO timesheet.  This is where her actual time comes from so that it is compared against the retainer in the second invoice.  I'm just not sure about the donation-in-kind that reduces the original invoice, but if it is put on the second invoice.  How do we take the donation into consideration to show that she is in fact donating some of her time?

QuickBooks Team

Re: Client retainer (invoicing and payments)

Hi there, @tlh121018.

 

You can mark the donated time as billable to your client. Let me add more details about this and help you from there.

 

Making a time billable to your client allows you to invoice their recorded time. And once you charge a customer for the services, you can turn the retainer into a credit on an invoice and receive it like a payment.

 

When you've already zeroed out the invoice, it'll now show that there was a decrease in your liability account. And the retainer will show as an income.

 

You can track your retainers by pulling up and customizing your Balance Sheet report. Here's how:

  1. Click on Reports from the left panel.
  2. Look for Balance Sheet on the search bar.
  3. From the Report Period drop-down, choose All Dates.
  4. Click on Run report.
  5. In the Liabilities section, locate your trust liability account.
  6. Select the amount shown for the account to open the Transaction Report for that account.
  7. Select Customize.
  8. In the Rows/Columns section, select Customer from the Group by drop-down list.
  9. Select Run report.

You may refer to this article for more information:How to Record a Retainer or Deposit?

 

Please let me know if you have any other questions. I'd be happy to answer them.

Established Community Backer ***

Re: Client retainer (invoicing and payments)

@tlh121018 

 

You need to sit down with a tax accountant.

Services donated have no cost, and as a result there is no expense either.

Only c-corporations can donate and deduct that donation under charitable giving at tax time.

 

I would do it as a sales discount, ie

service item, hours = 12, rate = XXX (posts to income)
sales discount item, hours -2, rate = XXX (posts to sales discount income account)

Senior Explorer *

Re: Client retainer (invoicing and payments)

Thank you for your reply, Alessandra_B.  However, we already record the retainer as you suggest.  It's the donation of time that I'm struggling with recording and how to deduct that from the invoice without leaving a balance in the retainer.  I feel like there is a piece missing from our steps.

Senior Explorer *

Re: Client retainer (invoicing and payments)

Thank you, Rustler.  We do already record it as a discount on the first invoice with the retainer.  Do I need to do anything with it again once the retainer is received?

1st Invoice:

Retainer  10 hrs x $120 = $1200   (liability)

In-kind Donation  - 2 hrs x $120 = -$240 (discount)

Total Invoice $960

 

Payment received against 1st invoice = $960

 

2nd Invoice:

Client Services (actual time) 12 hrs x $120 = $1440 (income)

Retainer less retainer received = -$1200 (liability)

Total Invoice $240

 

Now this 2nd invoice will just sit there with a balance because we won't be billing for the $240.  But if I subtract it again from the invoice, it will double the in-kind Donation.  Am I missing something? Should I subtract it from the income account to bring that down to $1200?

Established Community Backer ***

Re: Client retainer (invoicing and payments)

@tlh121018 

 

The issue is the first invoice, sorry I seem to have misunderstood the work flow

the first invoice, the retainer discount, should also post to the retainer liability account

then on the final discount, you enter the 2-hour sales discount

Senior Explorer *

Re: Client retainer (invoicing and payments)

Oh, now I think that makes sense.  So instead of using the in-kind item on the 1st invoice, it should just be another line of Retainer with the deduction of 2 hours.  Then on the 2nd, the discount will reduce the income. 

I think I also incorrectly put the hours on the 2nd invoice sample, because she would still only need to work 10 hours, but she'll get paid for 8.

Thanks for your assistance, Rustler!

Senior Explorer *

Re: Client retainer (invoicing and payments)

For clarity to others who may read this thread, this is my new workflow:

1st Invoice:

Retainer  10hrs x $120 = $1200 (liability)

Retainer (in-kind donation) -2hrs x $120 = -$240 (liability)

Total Invoice = $960

 

Receive payment = $960

 

2nd Invoice:

Services (actual time) 10hrs x $120 = $1200 (income)

In-kind donation -2hr x $120 = -$240 (discount)

Retainer (less amount received) -$960 (liability)

Total Invoice - $0

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