Customer Holdbacks

In the construction industry, there is often an amount withheld after a project is completed (retainage) for final inspection and approval by the client. Because this delay can sometimes be several months or longer, and a contractor’s financing can be contingent, in part, on accounts receivable, using this account maintains timely payment collection statistics (when reporting on the average days outstanding for customer bill payments).

To account for a holdback (retainage) in Sage 50 Accounting:

Create a Holdback Receivable asset account (if you have specified Construction/Contractor as your company's industry type, it is set up for you automatically). Make sure that the Holdback Receivable account allows project allocations.
When issuing an invoice for your project, enter line items for the amounts owing, and create an additional line item on the invoice, as a negative amount, for the amount or percentage of the holdback. Specify the Holdback Receivable account (in the Acct column) and allocate the amount to the appropriate project.
When the client has signed off on the job and it is time to bill for the holdback, create a new invoice for the positive amount of the holdback amount, specify the Holdback receivable account, and allocate the amount to the project.

To ensure your holdback invoice amount is received, generate a Customer Aged report to determine which customer invoices are overdue.