Table of Contents
This document will guide you on how to set up the retainage on an opportunity, withhold when invoicing, invoice for retainage and how to record retainage using Aspire's EOM Reports.
What is Retainage?
Sometimes, when invoicing construction projects, the Project Owner, Bank, or General Contractor will require the company that's invoicing to withhold retainage from their invoices.
Retainage can be between 5% - 10% or as negotiated in the contract. These amounts are released at the end of a project, or periodically based on the negotiated contract, once the site has been walked or all punch list items have been completed.
A punch list is a list created by the project owner of defects or areas that need attention at the end of a project
Aspire allows you to set the retainage amount to be withheld on an opportunity with the Fixed Price Open Billing invoice type so you can:
Withhold the retainage from invoices
Invoice for retainage
Setting up Retainage on an Opportunity
When setting up your Work Order, you will select Fixed Price Open Billing as show in the below:
You will click on the receipt icon to the right of Invoice Type. This will display the Invoicing Info box. You will enter the Retainage percent based on your contract as shown below.
Aspire also gives you the option to add a Retainage Maturity Date. This date represents when your company believes you will be able to invoice for the retainage. Enter the date as shown in the picture below. Then click save.
Invoicing with Retainage
When you are ready to invoice for the opportunity, you can create the invoice from Invoicing Assistant or from the opportunity itself. This document will be using Invoicing Assistant for the invoice creation.
In Invoicing Assistant, search for your opportunity and click on it.
Click on New to create the invoice as shown below:
Next, you will fill in the amount you would like to invoice. This will populate the amount of the invoice and will reveal the amount of the retention to be withheld in this invoice.
Complete the batch and send to the customer.
Traditional Aspire Invoice
For Pay Application users, once you complete the batch you will be able to print the invoice using the pay application version of your choice.
Sample Pay Application from Aspire (Page 2)
Invoicing for Retainage
When invoicing for retainage, the process is very similar to creating a typical Fixed Price Open Billing invoice with the exception of which New you select to create the invoice. You will select the New on the retainage line.
Select the date of the Retainage Invoice in the box that appears after clicking on the New. Enter the amount of retainage that you are invoicing for. The amount defaults to the dollar amount of 100% of the retainage.
Complete the batch, and print the invoice.
Normal Invoice Layout Example:
Pay Application Layout:
(Typically when invoicing for retainage only page 1 of the pay application is needed, but you are able print all the pages if needed.)
Note: When invoicing for retainage on a Pay Application, the retainage that has accumulated on Line 5 above is zeroed out and moved to Line 9: Current Payment Due.
Processing End of Month (EOM) with Retainage
Aspire has separated the Retainage on the EOM Report so that clients can now book the Retainage Receivable on their balance sheet when closing the month via the EOM Journal Entry. Below is the process of where you can find the Retainage on the EOM Report and how to add it to your EOM Revenue Journal Entry.
At the EOM Report Revenue Tab, you can now see a ‘Retainage’ line on the report. The amount showing in the debit column is a culmination of all retainage captured (withheld) on the progress billings during the month and any retainage invoiced during the month.
If you click into the dollar amount ($) you will see a breakdown of the dollar accumulated during the current month of the report. This report gives you a picture of what was invoiced and the amount of retainage that was withheld from those invoices during the month.
When processing your EOM Revenue Journal Entry, you will separate the Retainage amount from the Accounts Receivable Amount.
Typically, if you are withholding retainage from your invoices, you are reporting invoiced as Earned Revenue in Aspire and your EOM Journal Entry would resemble the following example:
Historically, when entering the EOM Revenue Journal Entry, you would add all of the items above the word Revenue on the EOM Revenue Report and enter that total into the Accounts Receivable line item in the journal entry.
However, when there is retainage, you will exclude the retainage amount from the Accounts Receivable number and enter the Retainage amount into another account on the journal entry called Retainage Receivable.
(Note: The remaining information on the journal entry is entered as shown.)
When Retainage is Invoiced...
When the retainage has been invoiced, it will show up in the credit column of the EOM Report Revenue Tab if it is the only item being invoiced; or, it will be included and offset the other retainage amounts that were deducted from invoices.
You can click into the retainage amount on the EOM Revenue Tab to view the additions and subtractions.
When you click into the retainage amount, you will see all the transactions with retainage for the month.
When you create your journal entry from EOM Revenue Tab for the month closing, you will enter Retainage amount as a credit if it shows as a credit on the EOM Revenue Tab, as shown below in the two pictures.
If you have any questions or need further assistance, please reach out to the AspireCare team!