P&L showing Contractor Retention is paid when it has not yet been paid

I understand the importance of running an accurate Product&Loss (P&L) report for your business, Rebecca.

The report on your P&L will always vary based on the amount recorded in your invoice. I recommend checking the 10k transaction amount to identify what caused the discrepancy and to delete or remove it if necessary.

Here's how:

1. Click on Reports at the left pane.
2. Search for Profit and Loss, then open the report.
3. Locate the transaction, then click the amount.
4. Review the from there details.

Additionally, I have included this article that can assist you in maximizing the benefits of your financial reports: Customize reports in QuickBooks Online.

I'll be on the lookout for your response. Please let us know if you have further concerns regarding your reports or any other QuickBooks-related issues. Stay safe.

This is happening for every single invoice ever invoiced  for as many years as I go back.

I did look at the P&L transactions, It shows Foundation $10,000, even though there was a -$1,000 line bringing the invoice payment to $9,000 and even though the check recorded was only $9,000. P&L shows $10,000 received and is wrong.

Hello Tiffany,

I'm here to help fix the issue you encountered about recording contractor's retention.

The data on your report is based on how you record the transaction. With that, can you share here how you recorded the invoice?

In the meantime, when you record retention, you'll create a different retention item and a retention account. Then, make sure that the amount is set to negative.

Here's how to create a retention account:

1. From the Transactions tab, select Chart of account.
2. Click New.
3. On the Category Type section, select Other Current Assets.
4. Select Retainage as its Detail Type.
5. Give it a Name.
6. Click Save.

Then, create a retention item:

1. From the Sales tab, select Product & services.
2. Click New.
3. Enter a Name for the item.
4. Select the account created a while ago.
5. Click Save.

From there, you can create an invoice.

Moreover, I've added here an article on how you can review retainer: View Retained Earnings account details in QuickBooks Online.

Feel free to come back here if you need anything else. Thanks!

That is exactly how retention is set up. The P&L is still showing that the full invoice amount was paid when only the amount minus (-) retention was paid. The invoice payments is correct but income on P&L is wrong

I appreciate you for keeping an eye on this thread and providing more details on how the Profit and Loss report works on your end, 

I understand that the Profit and Loss report should display $9,000 as the base amount before we deduct the retention.

Still, let's double-check how we're handling the retention amount in your Profit and Loss report to make sure we're doing it right. When doing so, review the accounting treatment, you can check with your accountant to make sure everything is reported accurately.

Once we've verified that they're all entered correctly, you can follow the steps below to isolate this behavior. 

1. Access your QBO account in an incognito window to make sure that cached data isn't causing the issue.
   Google Chrome: press Ctrl + Shift + N
   Mozilla Firefox: press Ctrl + Shift + P
   Safari: press Command + Shift + N
2. Once done, clear your browser's cache and cookies. This can often resolve issues related to stored data.
3. You can also use other supported and up-to-date web browsers.

If you've already given those a shot and the issue persists, I suggest contacting our Support Team to dig deeper into the Profit and Loss report behavior.
 

Additionally, you can visit this article to get more information on how to personalize QuickBooks reports. It provides detailed guidance on customizing reports to suit your specific needs: Personalize report. 

You can always count on this thread if you still have any worries about QuickBooks reports. We'll quickly give you the help you need to make sure your QuickBooks experience is smooth.

@RebeccaTiffany 

I would strongly suggest not taking advice from QB employees on this.  This is way beyond their scope IMO.

"The Profit & Loss however shows that we were paid $10,000 but that isn't true. This is happening with every single invoice paid. Why does it do this? I don't see where the $1,000 is ever taken back out on the P&L."

QB is unable to reduce income by the $1,000 retainage on cash basis.  The way QB is designed, it cannot accurately adjust a cash basis P&L when an item on an invoice is mapped to a balance sheet account - as you have with the retainage item.  Because you're on cash basis, your CPA/tax accountant should recognize the retainage asset on your balance sheet as an issue and reduce your income by that amount.  They may not suggest making an adjusting entry in your books, but they should adjust for that on the return.  

@RebeccaTiffany 

Here is a link to a great video that explains the issue.  The video uses QB Desktop for Contractors but is applicable to Online.

QuickBooks For Contractors - Retention and The Cash Basis Issue 

Thank you for the video! I understand the retention line is tied to the balance sheet however if I am logging a payment of $9k it is beyond me why the cash basis P&L would show that we received $10k when we only received $9k.

I really cannot believe that QB hasn't fixed this issue in all these years. 

@RebeccaTiffany 

In thinking about this issue some more, the issue is that the invoice has $10K in income and $1K in a balance sheet asset account.  Therefore, in order to keep your balance sheet balanced, QB has to book $10K in income (equity) to equal the $1K retainage (asset) and the $9K cash (asset) in order to keep things balanced.  Assets = Liabilities + Equity (10 = 0 + 10). 

So you have a couple options: 

1) Put the retainage on a separate invoice.    

2) You can assign an income account to the retainage item.  That way, the retainage item will reduce your income by $1K (with a separate negative Retainage Receivable line item on your P&L) instead of booking it to an asset account on the balance sheet.  In the video I sent, the guy mentions that the default account on the Retainage Receivable item (in QB Desktop for Contractors) is an income account and he didn't understand why.  I think this is why.  You need your retainage item to reduce your income.  Then, when you receive the retainage, book that to Retainage Receivable and it will remove the negative income on the P&L.  

@RebeccaTiffany 

"Here is what our invoices look like

Foundation $10,000

Retention -$1,000

Invoice Total $9,000"

Disregard my last post.  The answer is, instead of creating the invoice as shown above, create the invoice with two line items: $9,000 Foundation and +$1,000 Retention.  When you receive the $9K payment, that will book $9K in cash basis income and you will have $1K as a receivable (accrual).  The issue with the way it's being done now is that you cannot have an asset showing on your cash basis reports without showing $10K in income.  You need that asset to go away on your cash basis balance sheet.  Doing it this way will fix it.

@RebeccaTiffany 

Although that will increase the invoice amount to $10K so I'm not sure if that would work for you.  The retainage item assigned to an income account and added as a negative amount on the invoice is probably your best bet, or a separate retainage invoice, either way. 

Sorry for the flurry of responses - too much caffeine this morning!

Hi thanks for all your input! I was thinking if I should change retention to income. I just think if I apply a $9k payment then the p&l should show $9k received it's just weird to me. So what if the whole invoice was $10k no retention line and I logged a $9k payment would the p&l still show $10k received when only a partial payment was received. So odd to me.

Aside from doing it as an income account or a manual entry I don't see a way around this, I think QB should fix in cash basis to show the real figure that was actually received in income but I've had 0 help from QB on this issue. It seems like most ppl at QB support don't even know what retention is

@RebeccaTiffany 

"So what if the whole invoice was $10k no retention line and I logged a $9k payment would the p&l still show $10k received when only a partial payment was received."

Yes, in that scenario, your cash basis P&L will correctly show $9K in income.  Or, as mentioned in a previous post, the invoice can have a $9K income line and a $1K retention line (both items mapped to income accounts) and that will also show just the $9K payment received as income.  That solves the issue by allowing QB to remove A/R when running cash basis reports.  You need QB to remove the retainage receivable from your financial statements and posting it to A/R via the invoice total of $10K will do that.     

The only issue I see with that is how to keep track of how much retention I have to bill still

@RebeccaTiffany 

You can track that by using the A/R Aging Detail report.  That's the beauty of using A/R instead of a non-A/R Retainage Receivable asset account. 

We do the same thing and have the same issue.  The problem with this solution is the customer does not owe the retention amount we are holding back until we invoice it. If we bill it as a positive number then it will look like they are past due when they aren't.

we have retention as other current asset (named: retention receivables) and bill it the same

invoice  amt : $10000

retention held: $-1000 retention

owed $9000

When we bill the retention we have an item called: last payment retention that we bill on. It is an other charge type with account going to retention receivables account (other current asset)

Our P&L is not correct either and our balance sheet shows a negative in the AR and a balance in the attention receivables asset.

Not sure if this is correct Watch this video

https://www.youtube.com/watch?v=g61Gix790d4&list=LL&index=1&t=528s

Hello there, tacas. Let me shed some light on why your profit and loss are inaccurate and why the balance sheet shows negatives in AR.

A noticeable discrepancy between the Profit & Loss may be due to one or more issues, including, but not limited to, the following:
 

• The date ranges of the reports do not match.
• The accounting bases of the reports do not match.
• Sales items point to incorrect sales accounts.
• The P&L report includes transactions that do not use items (e.g., the Expense Tab on a bill or a journal entry).
• List of transaction damage in the company data file.

Meanwhile, a negative Account Receivable (A/R) results from customers' credits or overpayments. It's also because a specific transaction is charged twice, resulting in double payments. You'll want to run the A/R Aging Summary report to check the associated transactions and review the possible overpayments. 

On the other hand, it's advisable to seek advice and guidance from your accountant to ensure the steps in the video align with the needs of your business. It will also guarantee the accuracy of your financial records, including the proper recording of transactions. If you don't have one, you can find a professional through this link: https://quickbooks.intuit.com/find-an-accountant/.

For future reference, you can set up automated reminders for your customers. This feature can help you get paid faster and reduce the number of overdue payments. 

I'm always here to back you up whenever you require further assistance concerning your QuickBooks profit and loss report and transactions. 

@tacas 

Use the video below instead (I'm only able to attach the link for some reason and not the preview).  He is specifically addressing the cash basis income issue when billing retention in Desktop.  The video you posted doesn't address cash basis issues and is only addressing how to bill for the retainage receivable already recorded as an OCA and how to get it to post to A/R.

https://www.youtube.com/watch?v=PUBGl5Sc-xk 

I have been a QBD user for 20+ years, and will tell you that the desktop version’s P&L statement does in fact show the amount of the invoice and the amount actually paid, and the amount paid is what is showing up on the P&L. 

@Rainflurry 

thank you for your suggestion; however, for many, this won’t work. We have several items that make up our invoices. Once we sub-total, we then have a separate line item for the retention, showing the final balance the contractor will pay. 

That is correct on typical invoices but when we do retention for some reason the P&L shows the total paid from each line item and does not reduce it by the retention item.  There has to be a fix for this.I am so glad I saw this post because this is our first year using retention and I didn't realize it was showing it in the income line. 

@jschwartz20 @tacas 

"thank you for your suggestion; however, for many, this won’t work. We have several items that make up our invoices. Once we sub-total, we then have a separate line item for the retention, showing the final balance the contractor will pay."

Just to confirm, this thread only applies to cash basis reporting.  What exactly won't work?  If your retention item is mapped to an income account, and entered as a negative amount on the invoice, your P&L will show $0 income until payment is received on the invoice, at which point, only the net received from your customer will show as income on cash basis.  There will be two entries on your income ledger(s) depending on what income account you are mapping the invoice and retention item to: one for the total invoice amount and another for the retention as a negative amount, thereby reducing income by the retention.  That is the crux of this thread.  It works like a charm.  Then, when you bill for retention, add the retention item to an invoice and it will remove the negative income entry. 

The issue the OP had was that the entire invoice amount is showing as income when the invoice payment (less retention) was received.  That's because the retention was mapped to an asset account.  It can't be mapped to an asset account if you're on cash basis.  If you map retention to a balance sheet account, the entire invoice amount will post as income when the payment is received because the basis of double-entry accounting is assets + liabilities + equity.  If you post retention to an asset account, then retention + payment = income.  That why it needs to be mapped to an income account.  That way, payment = income - retention.           

@jschwartz20 @tacas 

EDIT:  the basis of double-entry accounting is assets = liabilities + equity. 

I changed it to an income and everything seems to be correct now.  -Thank you!