Accounts Payable lets you account for retainage (or a holdback) that occurs when your vendor withholds a percentage of an invoiced amount, usually by mutual agreement or according to a statute (such as a Builders Lien Act).
There are two steps in processing retainage:
An invoice, debit note, or credit note from which retainage is taken is called an original document in Sage 300.
You enter the invoice, debit note, or credit note using the A/P Invoice Entry screen, as usual. To indicate that retainage applies to the document, however, you select the Retainage option.
Note: The Retainage option appears only if you selected the Retainage Accounting option for your Accounts Payable system.
Accounts Payable then displays the retainage percentage, retention period, retainage rate, and the retainage terms from the vendor record. You can change these retainage factors for a particular document, as follows:
The retainage amount is subtracted from the document amount (or the document total) to calculate the amount due.
You can enter a different retainage percentage in the Retainage Percentage (%) field. When you enter a new percentage, Accounts Payable recalculates the retainage amount.
Retainage Rate. You use this field to specify the method Accounts Payable uses to determine the exchange rate for the retainage document when you eventually process it. You can choose one of the following:
Accounts Payable displays the code specified for retainage terms in the vendor record, but you can change the retainage terms for a document.
When you apply original debit notes or credit notes that include retainage in A/P Invoice Entry, or when you apply credit notes in A/P Payment Entry, only the original document balances are affected. Outstanding retainage amounts remain with original documents until you post retainage documents or adjustments to clear the outstanding retainage.
Tax on retainage is processed according to the Report Tax option selected on the A/P Options screen. The option provides the following alternatives:
Some tax authorities require that you report tax when you post a retainage document; others let you report tax when you post an original document to which retainage applies.
If the tax authority reports tax At Time of Original Document, the tax amount is calculated and the tax tracking reports are updated immediately when you post original documents.
If the tax authority reports tax At Time of Retainage Document, the tax amount is calculated when you post the original document, but it is not reported until you post the retainage document.
To report tax, Accounts Payable posts tax amounts to a tax liability account and updates the tax tracking reports. The timing of the tax liability on retainage documents depends on the tax authority.
When you post the original retainage document, Accounts Payable deducts the retainage from the document total, and posts the amount to the retainage control account.
For example, if you enter an invoice for $10,000 with 10% retainage, an invoice is posted for $9,000 with retainage outstanding of $1,000.
The retainage amount remains in the control account until you invoice it in accordance with:
You invoice for outstanding retainage amounts, or holdbacks, either manually, using the A/P Invoice Entry screen, or automatically, using the A/P Create Retainage Batch screen. If you have posted debit notes and credit notes to which retainage applied, you also create retainage debit notes and credit notes using the Invoice Entry screen and the Create Retainage Batch screen.
Normally, you would use the Create Retainage Batch screen to invoice periodically for retainage. However, Accounts Payable also lets you process outstanding retainage manually.
To invoice manually for outstanding retainage, or to manually process a credit note or debit note to clear an outstanding retainage amount, you use the Invoice Entry screen.
You enter information for the retainage invoice, credit note, or debit note, as usual. To invoice for retainage, you must:
Select Retainage Invoice, Retainage Credit Note, or Retainage Debit note as the document type, consistent with the original retainage document for which you are now processing outstanding retainage. (These options are not available if you selected Item as the detail type.)
Because outstanding retainage remains associated with the original retainage document, you must use a retainage invoice if the original document was an invoice, a retainage debit note if the original document was a credit note, and a retainage debit note if the original document was a debit note.
Use the Original Document field to specify the original retainage document for which you are invoicing the outstanding retainage.
When you post the retainage documents (invoices, credit notes, or debit notes), Accounts Payable transfers outstanding retainage amounts from the retainage control account to the payables control account.
You can view retainage information on the:
Select a retainage transaction, then click the:
The Document Information screen shows:
If you use multicurrency, when you run Revaluation, Accounts Payable also revalues amounts outstanding in the retainage control account.
For revalued outstanding retainage, Accounts Payable creates general ledger entries to adjust the retainage control account rather than the payables control account.
If your Sage 300 system uses the Realized and Unrealized Gain/Loss accounting method to revalue multicurrency documents, Accounts Payable also creates reversing entries for the next period. (You set the revaluation accounting method using the Company Profile screen in Common Services.)
The A/P Revaluation Posting Journal includes a separate section for retainage after the current revaluation for each vendor.