AR Invoices with Retainage: General Information

If a customer retains a part of the amount of an invoice, to process the total amount of the invoice, at least two invoices are created in MYOB Advanced: the accounts receivable invoice with retainage, and the retainage invoice. The invoice with retainage is paid during the period of time agreed upon between your company and the customer. The retainage invoice is an invoice that contains the retained amount or a part of the retained amount to be paid, and it is paid after the contractual work has been finished. Multiple retainage invoices can be created for one invoice with retainage.

Learning Objectives

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

  • Create a pro forma invoice and the related AR invoice with retainage
  • Process the AR invoice with retainage
  • Release the retainage from the AR invoice
  • Apply payments to invoices with retainage

Applicable Scenarios

You process an invoice with retainage when the customer has withheld a part of the invoice amount until the work is substantially complete to assure that your company will satisfy its obligations and complete the construction project.

The Processing Workflow of an Invoice with Retainage

Typically, an AR invoice with retainage goes through the following states during its life cycle:

  1. Entering the invoice with retainage and preparing the invoice for release: A data entry person creates the invoice with retainage in the system on the Invoices and Memos (AR301000) form. The balance of this invoice equals the sum of the extended prices minus the line discounts of the lines of the invoice, with this subtotal reduced by the retainage amount. The total amount of the invoice (which is shown on the Retainage tab) is the detail total amount plus the retained amount.
  2. Releasing the invoice with retainage: An accountant releases the prepared invoice. This released invoice is assigned the Open status, affects the balances of the selected customer and the general ledger accounts, and requires further processing.
  3. Receiving a payment for the invoice with retainage: The accountant enters a payment in the system to pay the invoice, and then processes and releases the payment. The system reduces the balance of the invoice by the amount paid. When the payment is released, the balance of the customer is reduced by the paid amount and the general ledger accounts are updated. The invoice still has the Open status.
  4. Releasing a retainage: Once the work has been completed, the accountant releases a part of the retained amount or the full retained amount for the invoice. When the retainage is released, the system creates a retainage invoice with the Balanced or On Hold status, depending on whether the Hold Documents on Entry check box is selected on the Accounts Receivable Preferences (AR101000) form.

    When the retainage invoice is released, the system updates the balances of the customer, the related general ledger accounts, and the unreleased retainage amount of the invoice with retainage.

  5. Receiving a payment for the retainage invoice: The accountant enters a payment in the system for the retainage invoice, and then processes and releases the payment. The system reduces the balance of the retainage invoice by the amount paid. The balance of the customer is reduced by the paid amount, and the general ledger accounts are updated.

    If the full retained amount has been released and paid, the invoice 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 invoice with retainage keeps the Open status. The system reduces the invoice's unreleased and unpaid retainage amounts by the retainage released and the retainage paid, respectively.