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RMVz
November 29, 2022
Solved

Customer/Client Advance Payments, Retention Payments, and Progressive Invoice

  • November 29, 2022
  • 1 reply
  • 0 views

Hi,

 

I would like to ask on how to properly record advance payment and retention payments as per below scenario since we usually ask our clients  to pay an advance payment and it has to be deducted on the progressive invoices that we will be submitting to them later on.

 

For Example:

We have a contract with "Client A" that amounts to $1,000.00 and the terms of payment will be Progressive invoicing and it has a 10% Advance Payment and a 10% Retention Payment. (Retention Payment will be returned to us after the project warranty period)

 

Before starting our work we will be receiving a total of $100 which is 10% of the contract as mentioned above.

 

Since we are doing progressive invoicing, we need to deduct the Advance Payment as stated in the contract which will be 10% of the amount of the invoice and deduct as well the 10% Retention Payment. 

 

For example:

 

Invoice #1

Progress Amount = $300.00

Less Advance Payment = -$30.00

Less Retention Payment = -$30.00

Invoice total = $ 240.00

 

Invoice #2

Progress Amount = $700.00

Less Advance Payment = -$70.00

Less Retention Payment = -$70.00

Invoice total = $ 560.00

 

TOTAL RECEIVED PAYMENTS ARE AS FOLLOWS:

Invoice #1 + Invoice #2 = $800.00

Advance Payment = $100.00

 

Total Payment Received = $900.00 

 

Upon completion of project I have invoiced the full contract amount of $1000.00 but my client is still holding the 10% amount of the contract and will be only released after the warranty period.

 

I hope above example is clear and hoping someone could help me on how to proceed.

 

Thanks 🙂

Best answer by ChristieAnn 11

Hi there, RMVz.

 

Thank you for visiting the QuickBooks Community. I'll ensure you can correctly record the advance and retention payments on the progress invoice. Also, please make sure that you have the correct data accurately.

 

QuickBooks Online has the option to set up a deposit or retainer in QuickBooks Online as advance payment. This is treated as a liability to show that, although your business is carrying the money from a deposit or retainer, it doesn't belong to you until it's used to pay for services. When you invoice the customer and receive payment against it, you'll turn that liability into income.

 

To start with, I suggest creating a liability account to track the number of retainers you receive from your customers.

 

  1. Go to the Gear icon and select Chart of accounts.
  2. Click New. Then, select Other Current Liabilities from the Account Type dropdown menu.
  3. From the Detail Type dropdown menu, Trust Accounts - Liabilities.
  4. Enter a Name for the account (for example, Trust Liabilities) or accept the suggested name.
  5. Select an option from the When do you want to start tracking your finances from the is account in QuickBooks? dropdown list.
  6. Click Save and Close.

 

Once done, create a retainer item to use when creating an invoice to the customer. Please follow the steps below.

 

  1. Go to the Gear icon ⚙ and select Products and services.
  2. Click New. Then, select Service from the Product/Service information panel.
  3. Enter a name for the new product or service item (for example, Retainer).
  4. From the Income account dropdown menu, select the liability account created in Step 1.
  5. Click Save and close.

 

After that, you'll have to create a retention account and item so you can use them for Retention Payment. You can follow the same steps shared above and make sure to properly create the appropriate one. 

 

Then, you can now create an invoice or use the progress entry so you can enter the 10% advance payment and a 10% retention payment.

 

Here's how:

 

  1. Open the progress entry. Then, click Crete Invoice.
  2. Select the Customer name from the dropdown list.
  3. In the Product/Service column, select the Retainer/Deposit item and the Retention you've set up.
  4. Enter the amount received for the retainer in the Rate or Amount column. Also, the Retention.
  5. Click Save and close.

 

After that, you may refer to this article on how the Sales page gives you a great at-a-glance view of all the status of sales transactions like open and paid invoices: View sales transactions.

 

Feel free to keep me posted if you have any other concerns about recording transactions in QBO. I'm always right here to help you all the time, RMVz. Stay safe!

1 reply

C
ChristieAnn 11Answer
November 29, 2022

Hi there, RMVz.

 

Thank you for visiting the QuickBooks Community. I'll ensure you can correctly record the advance and retention payments on the progress invoice. Also, please make sure that you have the correct data accurately.

 

QuickBooks Online has the option to set up a deposit or retainer in QuickBooks Online as advance payment. This is treated as a liability to show that, although your business is carrying the money from a deposit or retainer, it doesn't belong to you until it's used to pay for services. When you invoice the customer and receive payment against it, you'll turn that liability into income.

 

To start with, I suggest creating a liability account to track the number of retainers you receive from your customers.

 

  1. Go to the Gear icon and select Chart of accounts.
  2. Click New. Then, select Other Current Liabilities from the Account Type dropdown menu.
  3. From the Detail Type dropdown menu, Trust Accounts - Liabilities.
  4. Enter a Name for the account (for example, Trust Liabilities) or accept the suggested name.
  5. Select an option from the When do you want to start tracking your finances from the is account in QuickBooks? dropdown list.
  6. Click Save and Close.

 

Once done, create a retainer item to use when creating an invoice to the customer. Please follow the steps below.

 

  1. Go to the Gear icon ⚙ and select Products and services.
  2. Click New. Then, select Service from the Product/Service information panel.
  3. Enter a name for the new product or service item (for example, Retainer).
  4. From the Income account dropdown menu, select the liability account created in Step 1.
  5. Click Save and close.

 

After that, you'll have to create a retention account and item so you can use them for Retention Payment. You can follow the same steps shared above and make sure to properly create the appropriate one. 

 

Then, you can now create an invoice or use the progress entry so you can enter the 10% advance payment and a 10% retention payment.

 

Here's how:

 

  1. Open the progress entry. Then, click Crete Invoice.
  2. Select the Customer name from the dropdown list.
  3. In the Product/Service column, select the Retainer/Deposit item and the Retention you've set up.
  4. Enter the amount received for the retainer in the Rate or Amount column. Also, the Retention.
  5. Click Save and close.

 

After that, you may refer to this article on how the Sales page gives you a great at-a-glance view of all the status of sales transactions like open and paid invoices: View sales transactions.

 

Feel free to keep me posted if you have any other concerns about recording transactions in QBO. I'm always right here to help you all the time, RMVz. Stay safe!

    R
    RMVzAuthor
    November 30, 2022

    Thanks for that. I was able to follow that clearly.

    M
    mv32
    November 30, 2022

    Thanks for your prompt response, @RMVz.

     

    I'm glad that my peer has given you an insightful resolution and seamlessly followed her recommendation.

     

    In a specific project, you will see the breakdown of all income, cost, and profit. The financial data of that project will reflect in the Overview tab, where you can run transaction reports. In your case, you'll want to select the Income section to see the advance payment and retention for each work.  You may or may not want to customize it since this will reflect all income to that project.

     

    Here's how:

    1. Go to Projects and then select the project in question.
    2. From the Overview tab, click the Income section.


       
    3. From there, choose the Export icon beside the Printer icon.
    4. Choose Excel or PDF.

     

    In addition, I've attached some articles as your reference as you create a progress invoice and more details about the Projects menu:

     

     

    As always, feel free to comment if you need more assistance. We're always here to lend a hand. Keep safe and well.

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