AP Bills with Retainage: General Information

If your company retains a part of the amount of an AP bill, to process the total amount of the bill, at least two bills are created in MYOB Advanced: the bill for which part of the amount is retained and the retainage bill that contains the retained amount to be paid.

Learning Objectives

In this chapter, you will learn how to do the following:

• Create and process a bill with retainage held at the line level
• Release retainage for the bill
• Enter a payment for the retainage bill
• Pay the outstanding balance of the original bill

Applicable Scenarios

You create a bill with retainage when it is necessary to withhold a portion of the contract amount until the work has been completed to assure that the vendor will satisfy its obligations and complete a particular project or project task.

The Processing Workflow of a Bill with Retainage

Typically, an AP bill with retainage goes through the following states during its life cycle:

1. Entering the bill with retainage and preparing the bill for release: A data entry person creates the bill with retainage in the system on the Bills and Adjustments (AP301000) form. The balance of this bill equals the sum of the extended costs minus the line discounts of the lines of the bill with this subtotal reduced by the retainage amount. The total amount of the bill (which is shown on the Retainage tab) is the detail total amount plus the retained amount.
2. Releasing the bill with retainage: An accountant releases the prepared bill with retainage. This released bill is assigned the Open status, and it affects the balances of the selected vendor and the GL accounts.
3. Paying the bill with retainage: The accountant creates a payment in the system to pay the bill with retainage, and then processes and releases the payment. The system reduces the balance of the bill with retainage by the amount paid. When the payment is released, the balance of the vendor is reduced by the paid amount, and the GL accounts are updated. The bill with retainage still has the Open status.
4. Releasing a retainage: Once the work has been completed, the accountant releases the retainage for the original bill. The user can release a part of the retained amount or the full retained amount. When the retainage is released, a retainage bill with the Open status is created in the system.

   When the retainage bill is released, the system updates the balances of the vendor, the related GL accounts, and the unreleased retainage amount of the bill with retainage.

5. Paying the retainage bill: The accountant creates a payment in the system to pay the retainage bill. The user processes and releases the payment. The system reduces the balance of the retainage bill by the amount paid. The balance of the vendor is reduced by the paid amount, and the GL accounts are updated.

   If the full retained amount has been released and paid, the bill with retainage is assigned the Closed status, and its unreleased and unpaid retainage amounts equal zero.

   If a part of the retained amount has been released and paid, the bill with retainage keeps the Open status. The system reduces the bill’s unreleased and unpaid retainage amounts by the retainage released and the retainage paid, respectively.

Open AP balances and unreleased retainage (retainage held) balances can be tracked at the AP bill summary level or at the line level. Whether the document balances are at the summary level or the line level, the setting is determined for each document individually. By default, a new document inherits the setting specified for the vendor in the Pay by Line check box on the Payment tab of the Vendors (AP303000) form. If balances are tracked at the line level, payments are also applied to these AP bills at the line level.