Client Retentions

Within Projects you can record sales and purchases against a project of a client. How can you keep track of retentions. And alert when they are due?

Example: a project for £100,000 was carried out, the money received was £95,000 and £5000 was kept back by the client to be paid after a period, we would like to keep track of this and alert us and the client when it is due. It would be good to have a list of the retentions, a full list of all clients and a clients list, like a statement we can send them, any advice would be appreciated.

Potential Answer: I had the idea to use recurring invoices tagged to projects, it would produce an invoice when retention was due, and send the invoice to myself and the client, with the correct number of days to pay. I can then check the invoice is paid against specific project tag, and check whole retention list in recurring invoice list. It would be useful if I could filter list by project tag ?

Further Explanation of a Retention And How Does It Work?
Retention is money held by the Employer/Client as a safeguard against defects which may subsequently develop and which the Contractor may fail to remedy.

Retention is usually set at either 5% of the value of the works or 3% in the case of some (usually larger) contracts.
Ordinarily there then follows a period commonly known as the “defects liability period”. This is usually either 6 months or 12 months, and 12 months is commonplace. During this period the contractor and therefore his sub-contractors have to make good any defects in the works.

Usually, unless remedial work is urgent, the works are inspected at the end of the defects liability period and a schedule of the defects is produced. The contractor and his sub-contractors remedy the defects and when they have done so, the works are inspected again and what is commonly referred to as a “Certificate of Making Good Defects” is issued and the second moiety of retention is paid out.

You could certainly use a recurring invoice template to trigger a new invoice at a set date in the future. Providing that recurring invoice is tagged to your project, any invoices created from that template will also be tagged.

From your project detail screen you can drill down on any attached recurring invoices from the “Show tagged items” button.

The other thing you can do is create a single invoice now for the £5,000 but set the due date well in advance (i.e. when the retention is due).

The main reason to not create an invoice now with a due date 6-12months in the future is VAT I understand the date of the invoice is the tax date and if you are not cash accounting then you’ll have to pay the vat even though the due date may be 12 months in the future.

So automatically generating the invoice using recurring system is a great feature for retentions, only making vat due in the vat quarter the invoice is actually generated in. Also if you only use recurring invoices for this, then you have a list of all retentions right there.

You are correct, you would be prematurely paying VAT if you’re on accrual accounting. Recurring invoices seem like a better solution.

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