How to track retainage in QuickBooks Online
QuickBooks Online Simple Start, Essentials and Plus have no retainage feature. The usual setup is a Retainage Receivable asset account, a Retainage product or service linked to it, a negative retainage line on each progress invoice, and a positive line on the invoice that releases it.
Fabric, built in Seattle Updated
What QuickBooks Online does and doesn't do
QuickBooks Online Simple Start, Essentials and Plus have no retainage feature: there is nothing to turn on that figures, holds or tracks it. Progress invoicing, which Intuit lists for Plus and Advanced, bills a share of an estimate, but it doesn't hold retainage back.
QuickBooks Online Advanced with Intuit's Construction add-on, and Intuit Enterprise Suite, can invoice by project phase and percent complete. Intuit's help page for phases doesn't mention retainage.
So most subcontractors set up an account and an item, and figure each period's retainage themselves or in their billing software.
Set up the account and the item
- In the chart of accounts, create a new account with the category type Other Current Assets and the detail type Retainage. Name it Retainage Receivable.
- In products and services, create a service or non-inventory item named Retainage. Mark it as sold to customers, and set its income account to Retainage Receivable.
Pointing the item at an asset account is the point of the setup. A negative Retainage line on an invoice then moves the held amount out of accounts receivable and into Retainage Receivable, instead of lowering your income. QuickBooks allows an asset account as the income account of a service or non-inventory item. This setup assumes accrual books; ask your accountant if you report on a cash basis.
Hold retainage on each invoice
Bill each line's work for the period, then add a line with the Retainage item and a negative amount: the retainage held this period, not the total held on the job so far. QuickBooks won't figure the percentage, so take it from your pay app, figured line by line (the retainage calculator shows how).
Here is pay app #3 on the sample job as a QuickBooks invoice: $103,755.00 of work this period, $5,187.75 of retainage held this period, and an invoice total of $98,567.25, the pay app's Current Payment Due. The sample is a stairs and railings package; the invoice looks the same in any trade.
| Item | Description | Amount |
|---|---|---|
| 1.2 | Stair 2, steel pan stair with concrete-filled treads | 36,800.00 |
| 1.3 | Stair 3, exterior galvanized grating stair | 8,700.00 |
| 2.1 | Interior picket guardrail at stairs and atrium | 17,835.00 |
| 2.2 | Wall-mounted handrail, 1-1/2 in. pipe | 9,120.00 |
| 2.3 | Main entry canopy, HSS frame with metal deck | 24,450.00 |
| CO1.1 | Roof access ladder with safety cage | 6,850.00 |
| Retainage | Retainage Withheld (5%) | -5,187.75 |
| Invoice total | 98,567.25 |
Release it at closeout
When the GC releases the retainage, create one more invoice with the Retainage item at a positive amount equal to what was held. That line moves the amount out of Retainage Receivable and back into accounts receivable, and the customer's payment clears it.
If the sample job closed after pay app #3, the release invoice would carry $13,623.13.
See what each customer holds
Open the chart of accounts, find Retainage Receivable, and run its report. Customize the report and group it by customer to see how much each GC is holding, then save the customization so it is one click next month.