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Receiving retention payments

retention is a payment amount withheld from a job, usually in the building and construction industry, that is not paid in full until the job is completed. This is done to ensure that all the work is complete to the payer's satisfaction before handing over the full amount.

If you're a contractor with a retention, you only need to complete a few short steps to record the retention in AccountRight before and after you've received the payment.

Not quite what you're looking for?

This topic covers retentions from the perspective of the contractor from whom the retention payment is being withheld. For information on how to handle retentions from the perspective of the business doing the withholding, see Withholding payments from contractors.

We'll use the following example for these steps:

MK Constructions (the AccountRight user) have made an agreement with Joy Smith that Joy will withhold a $20,000 retention until the building is completed to her satisfaction. Therefore, Joy will only be invoiced during the contract for the full amount minus the retention. The invoice for the remaining amount will invoiced at a later date.

But no matter your business' specifics, these steps and principles in recording a retention will work for you.

Before you begin

If you're the contractor from whom the payments are being withheld, you'll need to setup your company file with a new asset and new liability account. These accounts will help your record the retainer when the job begins and clear it when the job finishes.

Just received a retention?

OK, so you've been contracted for a new job and received your retention. First, we'll show you how to invoice a retention that has yet to be paid.

When the retention is paid

When the job is completed and the retention paid, you'll need to create an invoice for the value of the retention.

Want to learn more?

There's plenty of business experts on our community forum who know a lot more about retention payments than we do.

Julie Carter, one of our top forum contributors, has a wealth of experience in this area. Check out her great article on Retention money and how it works.