Available in Sage 50 Quantum Accounting.

Overview of Retainage

Note: Retainage is available only in companies using Accrual based accounting.

Retainage is an amount of an invoice that is withheld until a customer is satisfied that a job or part of a job has been completed satisfactorily. Retainage gives the customer some leverage for ensuring that a job is completed to satisfaction.

Retained amounts of invoices are not treated as aged payables or receivables until they are released. Once they are released, they are treated as normal receivables or payables.

Sage 50’s retainage feature allows you to withhold retainage on invoices from your vendors and automatically calculate the amount of retainage your customers withhold on your invoices. You can then track the amount of retainage on the Job Retainage report to quickly see what your customers owe you when the job is complete. You can also track the retainage withheld on your vendor bills/invoices and quickly see what your obligations are when the retainage is released.

Retainage and your Accounting

Retainage for customer invoices is considered to be revenue, even though you do not treat it as an aged receivable until it is released. Hence, retained amounts are still taxed at the time of invoicing and retained amounts are debited to an Asset account (Accounts Receivable Retainage) and the corresponding credit is applied to an Income account. When the retainage is released, your Retainage Receivable account will be credited and your standard Accounts Receivable account will be debited, and the released retainage will be handled as an aged receivable.

Correspondingly, retainage on vendor bills/invoices is considered to be an expense, even though it is not treated as an aged payable until it is released. When you enter retainage on vendor bills/invoices, you create a credit to your Accounts Payable Retainage account and a debit to the expense account for the line item. When you release retained amounts, you will debit your Accounts Payable Retainage account and credit your standard Accounts Payable account, creating an aged payable.