How to Bill for Retention in Sage 100

Understanding Retention Basics

Retention, also known as retainage, is a portion of payment withheld from contractors to ensure project completion and quality standards are met. Typically, retention amounts range from 5% to 10% of each progress payment. The retained funds create a financial incentive for contractors to complete projects according to specifications and protect owners from potential issues during construction.

Setting Up Retention in Sage 100

Enabling Retention Tracking To begin tracking retention in Sage 100, you must first activate the feature by selecting the Track Job Cost Retention Receivables checkbox in Accounts Receivable Options. This enables the system to handle retention calculations and tracking automatically.

Configuring Retention Accounts The system requires separate general ledger accounts for tracking retention:

• Standard Accounts Receivable account
• Retention Receivable account

These accounts must be specified in Accounts Receivable Division Maintenance. You can use the same General Ledger account for both if you don't need to track retention separately.

Processing Retention During Project Billing

Initial Invoice Entry When entering invoices with retention:

1. The net invoice amount (total minus retention) is debited to Accounts Receivable
2. The retention amount is debited to the Retention Receivable account

Payment Application The system processes payments in a specific order:

1. Payments are first applied to the regular Accounts Receivable balance
2. Once the invoice balance equals the retention amount, additional payments are applied to the Retention Receivable account

Billing for Final Retention

Preparing for Retention Billing

Before generating retention bills:

1. Open the job in menu 3-5
2. Locate the specific job number
3. Change the current retention rate to zero
4. Use the recalculate retention function to update invoices

Creating Retention Invoices

To generate retention invoices:

1. Access Job Billing Data Entry
2. Enter the invoice number with "-RT" suffix
3. The Amount Billable field automatically defaults to the retention-to-date balance
4. The Less Retention field is not applicable for retention invoices

Special Considerations

For Time and Material jobs:

• The Lines option is not available when recording retention invoices
• The system creates a new invoice with "-IN" extension during the Job Billing Register update
• Previous retention amounts are cleared from all customer invoices for the same job

Sales Tax Handling

Tax Calculation Options

Some jurisdictions require special handling of sales tax on retention:

1. Enable "Calculate Sales Tax on Retention Invoices" in Job Cost Options
2. Select "Calculate Sales Tax on Retention" in Library Master Sales Tax Code Maintenance
3. Apply these settings for each relevant tax code

Reporting and Tracking

Standard Retention Reports

Sage 100 provides several reports for tracking retention:

1. Accounts Receivable Aged Invoice Report
2. Trial Balance Report
3. Cash Expectation Report
4. Job Current Aging Report

These reports show retention balances included in invoice totals and help track outstanding retention amounts by project.

Best Practices for Retention Billing

Documentation Management

Maintain comprehensive records including:

• Original contract terms
• Progress payment history
• Retention rates and amounts
• Project completion documentation
• Final inspection certificates

Timing Considerations

Follow these guidelines for retention billing:

1. Verify project completion status
2. Confirm all contractual obligations are met
3. Review state-specific retention release requirements
4. Process retention billing within required timeframes

State Compliance Requirements

Release Timeframes

States have varying requirements for retention release:

• California: 45 days from completion date for private projects
• New York: 30 days after final work approval

Payment Applications and Billing Documentation

Pay Application Components

Include these elements in payment applications:

• Progress reports
• Completed work documentation
• Materials delivery verification
• Subcontractor invoices
• Work schedules
• Project photos
• Payroll receipts

Accounting System Integration

General Ledger Impact

The retention billing process affects several accounts:

1. Retention Receivable account is credited
2. Standard Accounts Receivable account is debited
3. System automatically adjusts subsidiary ledgers

Troubleshooting Common Issues

Invoice Generation

If issues arise during retention billing:

1. Verify retention rates are properly set
2. Confirm job status is current
3. Check integration settings between modules
4. Ensure all required fields are completed

Payment Processing

When handling retention payments:

1. Verify correct application of payments
2. Confirm proper account posting
3. Review retention release calculations
4. Check for outstanding retention balances

Conclusion

Effective retention billing in Sage 100 requires understanding both the software's capabilities and construction industry practices. By following these procedures and maintaining proper documentation, construction companies can efficiently manage their retention billing process and improve cash flow management.

The system's automated features, combined with proper setup and monitoring, provide a robust solution for tracking and billing retention amounts. Regular review of retention reports and careful attention to state-specific requirements ensure compliance and timely collection of retained funds.

Citations: [1] https://www.youtube.com/watch?v=iZ8WU26aPMQ [2] https://www.netsuite.com/portal/resource/articles/accounting/retainage.shtml [3] https://www.acutedata.com/how-is-accounts-receivable-retention-handled/ [4] https://www.youtube.com/watch?v=nkO-tFBV--0 [5] https://www.youtube.com/watch?v=5q7DVlLOEKs [6] https://syscon-inc.com/retention-lets-clear-this-up/ [7] https://www5.v1ideas.com/TheSageGroupplc/Sage100contractor/Top?category=8&start=20