Summary
Description
A retention is when a customer/supplier retains an amount of money for a specified period.
Resolution
Representative example
Your construction company has completed some work for your customer, ABC Garages Ltd. The total cost of this work is £10,000 (excluding VAT for now). You've agreed with your customer that they will pay you 90% of the full invoice value now, or £9,000. You then withhold 10% of the full invoice value for a period of six months.
Both your invoice and ledger would include VAT where applicable. Please note we have not used it in this example for explanatory purposes.
Sales Retention >
Record the full value of the invoice, using the invoice date
- From Sales, select Sales Invoices.
- Select New Invoice.
- Enter the full invoice details, ensuring to enter the net value of the invoice (in this case £10,000.00 excluding VAT). The full value of the sale will record on the sales ledger.
- Include a second line with the retention included. Enter this as a minus figure.
Using our example, if the retention was 10% enter this as -£1,000.
This also needs recording in an appropriate asset nominal ledger. - Select Save.
NOTE: You should record the retention to an appropriate ledger account. Or create one if required.
When the retention is paid, raise another Sales invoice
- From Sales, select Sales Invoices.
- Select New Invoice.
- Enter the retention amount from the previous invoice.
- Ensure you include the amount plus VAT. You should use the asset Ledger associated with the main invoice.
- Select Save.
- Once saved select Record Payment.
Purchase retention >
Record the full value of the invoice, using the invoice date
- From Purchases, then select Purchase Invoice.
- Select New Invoice.
- Enter the full invoice details, ensuring to enter the net value of the invoice.
The full value of the sale will record on the purchases ledger. - Include a second line with the retention included. Enter this as a minus figure.
Record this in an appropriate asset nominal ledger. - Select Save.
NOTE: You should record the retention to an appropriate ledger account. Or create one if required.
When the retention is paid, raise another Purchase invoice
- From Purchase, select Purchase Invoices.
- Select New Invoice.
- Enter the retention amount from the previous invoice.
- Ensure you include the amount plus VAT. You should use the asset Ledger associated with the main invoice.
- Select Save.
- Once saved select Record Payment.
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