Applying retainers to invoices in Billings Pro

Quick Tips / May 15, 2012 / Admin

For anyone that collects some sort of deposit, or pre-payment for their services, using retainers is essential for proper invoicing and good bookkeeping.

Retainers – aren’t those for teens with bad teeth?

A retainer is a deposit that a client pays you to put towards future invoices. Many service industries use them as a way of making sure that their billable time doesn’t go to waste. A project that is delayed means that a service based contractor, like a web designer who booked a couple solid weeks to work on a new site for a client, wouldn’t get paid until after it’s done without a retainer. Or, in the case of a wedding photographer, that retainer would ensure the date they’ve booked is solid. The amount would cover the opportunity cost of not being able to book another gig in case the bride and her potential mother-in-law come to blows before the big day and cancel the whole thing. Lawyers will also typically request a retainer before taking on a case to account for court fees and the time needed for the initial claim, for example.

Use an estimate to “invoice” the retainer initially

First thing you’ll need to do is send your client an invoice for the agreed retainer amount. Except that it’s not really an invoice, because you haven’t done anything yet. So we’ll use the Estimate feature to send our client a notification to pay up first.

Create a new project if necessary and add an estimate slip with a fixed amount of your retainer. Give the slip a name like “project retainer” or “deposit” so it’s clear what this is for. Click on send estimate and then switch to the preview tab.Click on the options button and under the General heading, change the header to say “Retainer/Deposit Due”.

Send that estimate off and when you’ve received the money from your client, instead of entering it in as a payment, switch to the accounts view and click the add retainer button. Add any notes necessary for your bookkeeping purposes (cheque numbers are sometimes a legal requirement for tax purposes in some places) and after clicking okay to confirm, you’ll see your retainer balance for that client in the accounts tab.

Using the retainer to pay invoices

Now you’d go ahead and start working, tracking your hours and expenses as working slips like normal. When you’re ready to invoice, select those slips and create a new invoice by clicking on the send invoice button. In the create invoice window, check the “apply retainer of” button to use that as your payment source for this invoice. If your invoice total is less than the amount in the retainer, the invoice will show a $0 balance, indicating to your client the amount billed for those services but that they don’t owe you anything yet.

As you whittle down that retainer, Billings will calculate the amount owing after deducting as much as it can from the retainer balance. For example, if you have a $1500 retainer balance and you create an invoice with slips totalling $3500, checking the apply retainer button will leave you with an invoice balance of $2000. You can use retainers in exactly this way to apply a payment on a project for which you collect a certain percentage deposit before starting work.

But when does the gravy train end?

To update your client as to the remaining balance, generate a statement by selecting Send Statement from the Client menu. Switch to the preview tab and click the options button. Check Show retainer balance and click OK. Send this statement along with your invoice to keep your client informed of how much more of your time they are lucky enough to have in the proverbial bank. You can also use the Swiss layout as a basis for your invoice template, which includes an alternate layout that includes the retainer history.

By invoicing this way, the payment dates will be correct and Billings Pro will book your income as of the date of the invoice, not when you collected the retainer.

No Responses to “Applying retainers to invoices in Billings Pro”

  1. However, what if I want the retainer logged as income when I collected it? For my tax purposes I have to record income when I received it, NOT when I invoiced the completed job. Currently the retainer approach as implemented in billings just mucks up my income tracking when reporting things to the IRS and figuring out Estimated taxes in the US.

  2. What MC does not contemplate is the requirement imposed on lawyers to maintain separate client trust ledgers for each matter or project.

  3. Hi,
    It would be useful to be able to print on the invoice how much of the retainer balance is still open, i.e., a credit of the client, how much the client has paid too much.
    Having to print out a statement each time is a bit cumbersome if one regularly works with retainers.
    Thank you and best wishes, Daniel

  4. PS: in Billings (not Pro): Can I also do this ‘statement’ trick to show the retainer and history like in Pro?
    Thank you, Daniel

  5. Rahim
  6. @Edward Rudd

    Retainers in Billings Pro were designed to hold amounts still belonging to the client until an invoice is created. However, if you use Billings Pro with Quickbooks 2012 for Mac or MoneyWorks, you can export these amounts into the same specified account as payments and use the accounting package for your tax preparation. If you wanted to keep it within Billings Pro, one of the Marketcircle partners may be able to script a report for you to show the information you need for your tax prep that would be used in conjunction with other payment reports to give total figures to the IRS and calculate estimated tax.

  7. @Tim

    This is something that is not currently possible in Billings Pro but we at MC are aware of this need for lawyers. It has been logged as a feature request with our development team. Thanks for your feedback.

  8. @Daniel

    You are able to show the retainer balance on the invoice for the client to see. There is a token for it listed below that should work for you to display this on the invoice: parent.parent.parent.parent.parent.parent.reportData.object.temporaryRetainerBalance

    If you have trouble finding and applying it, let us know.

    Also, you can display retainer history on a statement in Billings as well as Pro by going to:
    Send Statement-> Preview-> Options-> Show retainer balance.
    Keep in mind though that the Swiss template only has the default layout in Billings3.

  9. Ben
  10. In most cases, we find that we have to literally invoice the retainer to the client, then when they pay it we would log that as a payment for that retainer invoice. We then “raise” the retainer as a credit note in billings to load their credit with us. I’m not sure if this causes any issues with regards to totals in billings but as we only use billings for invoicing, not cashflow we don’t see the harm and it makes it easier to track.

    From an accountancy standpoint, we must declare the income when we receive it, it just makes it easier for us rather that jimmying together a dummy retainer invoice/estimate to get a client to pay then having billings log the income as it is consumed.

    Really the retainer system is pretty busted in billings, as are the custom template options for invoices, estimates and reports. But sadly it is the best product for mac on the market for tracking retainers.

  11. @Ben

    This method will affect reporting of income in Billings pro as your retainers would be counted twice this way. First, it would be counted with the initial retainer invoice, then again when the retainer is applied to the invoice as a payment later on. For accounting, this would essentially double your income from retainer clients and provide an inaccurate state of your business.

    We suggest using estimates to generate the retainer invoice as many people don’t count retainer income until it’s applied to an invoice. Retainer balances still belong to the client, but are being held in trust in the retainer account and used when directed to do so.

  12. Nice post dude!

  13. A lot of the things you mention happens to be astonishingly accurate and it makes me wonder why I had not looked at this with this light previously. This article truly did turn the light on for me personally as far as this specific subject goes. However at this time there is 1 issue I am not really too comfy with and while I try to reconcile that with the main theme of the position, let me observe just what the rest of your readers have to point out.Nicely done.

  14. Jef
  15. I add a retainer to an active project just as a regular slip with a fixed amount. I make an invoice only for this slip. (My clients absolutely need invoices for retainers.)

    After making that invoice, I immediately create another slip with the same fixed amount, but negative.

    When I make my final invoice, I will invoice automatically the correct amount. I assume this won’t mess up my totals and this is NOT registered twice?

  16. The General section is greyed out so I can’t change it to ‘Deposit” or anything like that – I’m stuck with ‘Estimate’ as a header which renders this approach pretty useless unless I crack the PDF open in Illustrator first before sending it… Am I missing something?

  17. Mike Auty
  18. @Matt

    You’re right, some estimate templates don’t allow you to edit the header. If you’ve customized your estimate template, I’d suggest changing the name in the template directly. The Swiss templates do work with this technique though…

  19. Hi,
    Great tip here ! I hope all that process will work in the same way in Billings (NOT-pro) version.
    It would be a great feature to include a ‘pre-payment’ feature into the next versions of this software. Can we all hope for this ?
    I’d just registered myself for tomorrow’s webinar about Billings PRO retainers & Deposits Features. I hope I learn more about all this…
    Have a nice day.

  20. Emily Rudow
  21. @MEZKLADOR Were all your questions answered during the Billings PRO retainers & Deposits Features webinar? If you have any additional questions, feel free to open a support ticket: http://bit.ly/gRVSTc for Billings or http://bit.ly/er9Ifv for Billings Pro.

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