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Apply retainer deposits to invoices

Forum|Forum|7 years ago
December 11, 2018
2 replies
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We received a customers retainer deposit that was applied as a sales receipt. We are doing progressive invoicing for the job with an estimate. Once we are ready to invoice the job how do I transfer the retainer deposit money from the sales receipt to the invoice?

QuickBooks Desktop

Best answer by qbteachmt

"Once we are ready to invoice the job how do I transfer the retainer deposit money from the sales receipt to the invoice?"

The same Prepayment item you put on that initial Sales Receipt, you will now put on a Credit Memo for the date of the invoice or later (not earlier than the invoice date).

Apply this credit memo to that invoice.

This assumes you don't have Trust Accounting requirements.

qbteachmtAnswer

"Once we are ready to invoice the job how do I transfer the retainer deposit money from the sales receipt to the invoice?"

The same Prepayment item you put on that initial Sales Receipt, you will now put on a Credit Memo for the date of the invoice or later (not earlier than the invoice date).

Apply this credit memo to that invoice.

This assumes you don't have Trust Accounting requirements.

A

aje

Could this also be done as suggested in QB Help when applying upfront payments (carried as liabilities until the work has been performed) to invoices? With this method, instead of using a credit memo, a line item (e.g., Client Phase Payment) with a qty of -1 is added to the invoice along with the amount of the payment. Or, is there a reason it shouldn't be done this way with progress invoicing?

qbteachmt

"Could this also be done as suggested in QB Help when applying upfront payments (carried as liabilities until the work has been performed) to invoices? With this method, instead of using a credit memo, a line item (e.g., Client Phase Payment) with a qty of -1 is added to the invoice along with the amount of the payment. Or, is there a reason it shouldn't be done this way with progress invoicing?"

Here is what happens and why I do not recommend this method:

Every invoice that has any negative on it, this is the Date of that payment, applied to the invoice = Paid on Cash Basis. If that prepayment makes a Partial Payment, this is Partially paid and Weighted allocation. If there is Sales Tax, that also is Partially owed. A $100 sale with 7% sales taxes, that is Half-paid, will = $50/$107 Cash Basis Paid for that date.

You can see this in my attached example.

We don't even have sales tax consideration. Here is another reason I stopped doing this, however:

In Customer Center and in Transaction Listing reports, you will see the Transaction as a row with its amount. Example: If you get prepayment and the invoice has that as negative, your Transaction List and report will show the invoice amount reduced. Example: $100 invoice with $100 prepayment entered directly on it = $0. Every time you look at that, you need to double-click to Open it to find the Actual Sales amount was $100. It shows as a $100 sale on Sales reports, but in Transaction Listings, the invoice ended as $0. If you use Invoice for $100, and credit memo to make the $100 prepayment available, then in Transaction listings in Customer Center and in reports, you see $100 invoice and $100 credit memo. And now, the clarity of the credit memo existing = I know I applied their prepayment, because that is why I use Credit Memos; and now you Also get to put a Date on the Credit Memo to apply their prepayment and control this for "partially paid by prepayment" to avoid the Cash Basis weighted allocation as the Invoice date.

T

trocky

If you use a credit memo for the retainer and apply it to an invoice doesn’t it wipe out the revenue? Example: The invoice is for $650 and the credit memo or the retainer is for $650. If the credit memo is used for the invoice the revenue would be zero dollars. This doesn’t make sense to handle retainers this way. What is the correct way to handle retainers? Especially if you are using a liability accounts.

AlexV

Hi there, trocky.

Let me share some details about retainers.

Upfront deposits or retainers are your liability, not income, even though you deposit the money into your bank account. When you record it, you should choose a liability account. It'll be converted into income once you apply it to an invoice.

We just need to make sure that we set it up correctly. For more details, here's how to manage upfront deposits or retainers in QuickBooks Desktop.

Shoot me a reply if you need anything else. Stay safe!

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