This article deals with posting manual adjustments to your client retainer balances (particularly to manually reduce a client’s retainer balance) in your bookkeeping software.

Client retainer balances are increased normally by simply creating an invoice and billing the client for a retainer fee up front, say for $5000.

Over time, as the work is completed for the client, a retainer balance, as some point, should be reduced and typically there are two basic ways of manually reducing a client retainer balance in your bookkeeping software. These manual adjustments are typically just for your internal bookkeeping records and you may not necessarily need to submit anything to your client (unless the job is completed and thus, they want some sort of report for closure reasons).

So here are the two methods:

1. Create a zero due (net zero) client invoice:
   1. Within this invoice, the first line item will be for services performed income and the second line item will be for the exact negative amount of the first line item, HOWEVER, the second line item will be for retainage and NOT the services income.
2. Create a Journal Entry to reduce the retainage:
   1. Be sure to post the credit to the income and post the corresponding debit to the retainage account (this debit will reduce the retainage liability to that client). Be sure to tie both line items here (the debit and the credit) to the proper client’s name.

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.