Retention refers to a portion of the payment withheld from a contractor or supplier to ensure that all contractual obligations are fulfilled satisfactorily. This practice is a financial safeguard, ensuring that any defects or incomplete work can be addressed before the final payment is released.
a) Settings-
To work with retention- go to Administration > General Settings > enable the option Enable Retention Purchasing.
b) Configuration per contract- After settings, make sure to enable the option per contract under the terms tab
- Enable the option- Apply Retention
- Retention %- add the default percentage for the amount to be retained
- Retention- add the Retention days, for how many days the amount will be retained
c) Record Document-
Record Invoice received document
Once the settings are done, the contract can be used in the Invoice received document to record the transaction.
For example- Create a new invoice received document, make sure to choose the right contract. With selection, the options will be enabled automatically.
In the inventory tab, the retention % and period will be filled automatically
Once the data is entered, post the document. The below entry will be created
Dr Goods
Cr Current Trade Payables
Before generating the Retention document, set up a new GL account under the Trade Payable section to track retention purchases.
Navigate to Chart of Accounts > Create a new GL Retention Purchasing. Use the copy feature to duplicate the existing GL account, then modify the code and include a description.
To transfer the trade payable balance to retention, generate a Retention Transaction (Purchasing) using the Generate option.
In the main tab, set the transaction type to Accrual, and the remaining details will populate automatically. Select the appropriate Retention Payable GL Account, ensuring it is the same GL account created above.
The retention amount will be calculated automatically based on the Retention %.
The entry will be Dr Current Trade Payable
Cr Retention Purchasing
