Customer Project Retainage

This article addresses how to create a simple Customer Retainage system in QBO. This is for your customers who keep a portion of what’s owed to you, say 10% of the entire invoiced amount, until the entire project is complete.

To begin, you will need to create three things here in QBO:

1. A Customer Retainage “Other Current Asset” type of account.
   1. For more information on how to create an account in QBO, please see my other corresponding blog about this.
2. A Customer Retainage service item in your Products and Services list.
   1. Be sure this new Retainage item is pointing to the new “Customer Retainage” account that you just created above; specifically, it is the income portion of this item that should be pointing to this new account since you will be utilizing this item in your customer invoices.
3. A customized report that you can process that shows you all of the current open customer retainage balances: I recommend creating and saving a customized balance sheet that has the following three parameters:
   1. Display column by “Customer”.
   2. Filter to only show the “Customer Retainage” other current asset account.
   3. Accounting Method should be “Accrual”.

Now to test this new system, simply create a customer invoice with the following line items within the invoice:

• Line item number 1: Your typical Sales item, for say, $100.
• Line item number 2: The Customer Retainage service item, but this time for a negative$10.

(The total amount of the invoice should be for $90; you will invoice for the remaining $10 later utilizing the exact same Customer Retainage service item in your 2^nd invoice.)

Now, to check your work, you will verify the following in your books:

1. The Customer Retainage other current asset account should have a balance of $10.
2. Your Customer Retainage customized report also should show this customer’s retainage balance of $10.
3. Your sales from this customer are, so far, $90.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.