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MYOB - Reckon - Quickbooks – A Method to Record Retentions

images/Red Question Mark.jpgClient - Emailed asking for a method to record retentions (common in the building industry) when invoicing a customer and whether GST is on the 10% retained.

Solution - Retentions are like a safe-guard for the purchaser who holds back say 10% of payment on a job, often up to 12 months, like an insurance in case there is a problem with the work performed by the contractor.

To enter, keep the GST code on all lines and invoices – it applies at any stage and on retentions when due.

To enter in your books you can do it several ways:

  1. Invoice for the full amount of the job or final instalment. On the next line of the invoice, raise -10% (or as applicable) and allocate that to an Asset account called something like Retentions. If you are using items, create the item ‘Retentions” and link it to the Retention Asset account. This account will be a record of what you are owed, like a debtors account. The invoice will then have a balance of 90% due.
  2. Or you could invoice the full 100% and send to the Payor. When they pay 90% (short the 10% for retention) the invoice will be left open in accounts receivable reports. Sometimes this is preferred.
  3. As in 2 above, with 10% left after payment, you could adjust the invoice to the 90% amount and it will be closed, then raise another invoice for the 10% retention amount either now or in 12 months’ time, when it is due.

Need help? Not sure? Call for FREE 30min advice / strategy session today! Aus +61 407 361 596

and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

For more business tips, see www.accountkeepingplus.com.au

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Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software

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Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
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