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Retentions - building industry

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  • # 118947

Good Morning

I was wondering whether anybody could please offer any advice on dealing with retentions. I am just about to start work for a new client who is in the construction industry. Some of their customers hold back a percentage of the invoice payment due for up to 18mths.

Currently my client's secretary has been crediting the % retention from the invoice once it has been sent and then re-creating a new invoice for the amount held back when the retention payment is finally received. She said that this stops the books from looking bad!

 

My gut feeling is that this is incorrect and the retention amount should remain on the customers account so that you have a complete record of Debtors, but as I have no experience at all of this situation I may well be wrong.

I have found this information from SAGE which makes sense:

 

How to set up and record a retention
  1. Record the full value of the invoice less the amount of retention using the invoice date.
  2. Record the value of the retention as an invoice using the due date of the retention.
  3. Post the customer receipt for the full amount less the retention.
  4. When the retention is paid record the remaining receipt.
Does anybody else use this method for recording retentions?

 

 

Thank you

Karen



Edited at 06 Aug 2020 07:43 AM GMT

  • Companion Fellow
  • Practice Licence
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  • # 118963

KarenM said:

Good Morning

I was wondering whether anybody could please offer any advice on dealing with retentions. I am just about to start work for a new client who is in the construction industry. Some of their customers hold back a percentage of the invoice payment due for up to 18mths.

Currently my client's secretary has been crediting the % retention from the invoice once it has been sent and then re-creating a new invoice for the amount held back when the retention payment is finally received. She said that this stops the books from looking bad!

 

My gut feeling is that this is incorrect and the retention amount should remain on the customers account so that you have a complete record of Debtors, but as I have no experience at all of this situation I may well be wrong.

I have found this information from SAGE which makes sense:

 

How to set up and record a retention
  1. Record the full value of the invoice less the amount of retention using the invoice date.
  2. Record the value of the retention as an invoice using the due date of the retention.
  3. Post the customer receipt for the full amount less the retention.
  4. When the retention is paid record the remaining receipt.
Does anybody else use this method for recording retentions?

 

 

Thank you

Karen



Edited at 06 Aug 2020 07:43 AM GMT

 I set up an other debtors account for each customer's retention.



Edited at 17 Aug 2020 03:24 PM GMT

  • Member
  • 1 post
  • # 118965

KarenM said:

Good Morning

I was wondering whether anybody could please offer any advice on dealing with retentions. I am just about to start work for a new client who is in the construction industry. Some of their customers hold back a percentage of the invoice payment due for up to 18mths.

Currently my client's secretary has been crediting the % retention from the invoice once it has been sent and then re-creating a new invoice for the amount held back when the retention payment is finally received. She said that this stops the books from looking bad!

 

My gut feeling is that this is incorrect and the retention amount should remain on the customers account so that you have a complete record of Debtors, but as I have no experience at all of this situation I may well be wrong.

I have found this information from SAGE which makes sense:

 

How to set up and record a retention
  1. Record the full value of the invoice less the amount of retention using the invoice date.
  2. Record the value of the retention as an invoice using the due date of the retention.
  3. Post the customer receipt for the full amount less the retention.
  4. When the retention is paid record the remaining receipt.
Does anybody else use this method for recording retentions?

 

 

Thank you

Karen



Edited at 06 Aug 2020 07:43 AM GMT

 Hi Karen, 

I work for a large contuction company and we accrue the retention value as part of WIP rather than rasie the invoice up front. This way the retention invoice is not sat as an aged debt on your ledger, and if there are defcets which result in deductions from the retention you don't have to raise subsequent credit notes. This is one option, otherwise the information of Sage is also correct.

I hope this helps.

Thanks

Heather

  • Member PM.Dip
  • Practice Licence
  • 65 posts
  • # 118967

Heather Seymour said:

KarenM said:

Good Morning

I was wondering whether anybody could please offer any advice on dealing with retentions. I am just about to start work for a new client who is in the construction industry. Some of their customers hold back a percentage of the invoice payment due for up to 18mths.

Currently my client's secretary has been crediting the % retention from the invoice once it has been sent and then re-creating a new invoice for the amount held back when the retention payment is finally received. She said that this stops the books from looking bad!

 

My gut feeling is that this is incorrect and the retention amount should remain on the customers account so that you have a complete record of Debtors, but as I have no experience at all of this situation I may well be wrong.

I have found this information from SAGE which makes sense:

 

How to set up and record a retention
  1. Record the full value of the invoice less the amount of retention using the invoice date.
  2. Record the value of the retention as an invoice using the due date of the retention.
  3. Post the customer receipt for the full amount less the retention.
  4. When the retention is paid record the remaining receipt.
Does anybody else use this method for recording retentions?

 

 

Thank you

Karen



Edited at 06 Aug 2020 07:43 AM GMT

 Hi Karen, 

I work for a large contuction company and we accrue the retention value as part of WIP rather than rasie the invoice up front. This way the retention invoice is not sat as an aged debt on your ledger, and if there are defcets which result in deductions from the retention you don't have to raise subsequent credit notes. This is one option, otherwise the information of Sage is also correct.

I hope this helps.

Thanks

Heather


 Many thanks Heather & Sian for your replies which are much aprreciated and do help.

As they say - I guess there is certainly more than 1 way to skin a cat!

Best wishes

Karen

 

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