Advances and Retainers in Project Operations

Problem Definition:

Earlier, milestones were used for advance payments which was not the actual purpose of it. But with the introduction of Advances and Retainers, milestones will only be used for their real purpose on fixed price lines.

What are Advances and Retainers?

The feature Advances and Retainers are seen on the Project Contract form.  Advance payment or the retainer fees both means the same. It is used for an advance payment from the customer/client. This feature can be applied on fixed price as well as on time and material contract lines.

Solution:

1. Steps for Setting up Advances and Retainers-
2. To use an Advances and Retainer-based contract you need to create a retainer schedule.
3.  A retainer record can be individually created or using setup a retainer schedule option.
4. An individual retainer record is created to get a one-time advance payment for some reason.
5. A retainer schedule is created for securing a monthly payment from the customer for managed services and it is also known as Managed Service Agreement (MSA).
6.  You must provide details to generate a retainer schedule as shown in the picture below.

2. How to invoice a retainer-
3. To invoice the retainer, it must be set to Ready for invoicing.
4. Unlike other invoices, Retainer invoices can only be invoiced on the set invoice date.

• In this above example, only the invoice of the date 9/12/2022 will be picked up for invoicing.
• If you click on create invoice, the retainer invoice will be picked up and shown in the Advances and Retainers column.
•  If there are no delivered services, the project-based lines will show the amount value as 0.00 as shown below:

• Once you confirm the retainer invoice, on Project Contract the invoice setup will change to Customer invoice posted and the Used amount will be 0.00 as no services are delivered against the invoice and the available amount will show the invoiced amount as shown below:

3. Delivering and Invoicing services against the retainer invoice-
4. When time entries are submitted and approved, Actuals are created with a Transaction class Retainer and Transaction Type of Billed sales and Unbilled sales.

• Select the unbilled sales and click on ready to invoice and on project contract click on create invoice.

• You will see above that the service amount will be used from the available amount.
• In Project Contract, will show the following changes.

4. How to discard a retainer at invoicing and set it to the quoted contract:
5. There might be a situation where you have to charge the services to the customer instead of using the retainer amount.
6. In that case, you must manually change the invoice as given in the below points.
7. Follow the same steps till invoicing, then on applied advances and retainers in used amount set it to 0.00.

5. How to refund retainer amount:
6. If the sum of the delivered services is less than the retainer amount.
7. You can refund the remaining amount.
8. Select the retainer invoice which was created at first.
9. Click on correct invoice as shown in the below picture:

• After clicking the button, a new invoice with the balance amount will be created as shown in the below picture.

• On Project Contract, the following changes will be seen.

• A new invoice will be created and the correction will also be seen in the project actuals.

Conclusion:

This feature is helpful for an organization delivering the project. Because it provides margin to recover the costs incurred due to any increase in scope that a fixed price contract would not have allowed.

Thank you, Sankalp for your valuable imputs.