How to handle vendor subcontractor retainage retention in QuickBooks Online

Let’s get started. Follow the step-by-step instructions.

Example: A vendor/subcontractor perform work on our behalf, we deduct 20% of the bill amount as Retention when we pay them. This is to protect us from any potential liability out of their faulty work. How do I record it in Quickbooks?

1. To set up sub-contractor retainage tracking, create a new Retainage account in the Chart of Accounts:

  • From the left Dashboard panel, click Accounting.
  • In the Chart of Accounts, click “New” green button at the far top right corner.
  • For Category Type, select Other Current Liabilities.
  • For Detail Type, select also Other Current Liabilities.
  • For the Name, enter Subcontractor Retainage Payable.
  • For the description, enter same as Name or something like 20% withheld from subcontractor payments.
  • Click Save and close.

See screenshot below for reference.

 

2. To enter expense bill and withheld retainage from a Subcontractor Bill:

In this example: Subcontractor bill is $10,000; pay them $8,000 and retain $2,000 for 4 months.

  • Click the + plus symbol, located at the top of the screen.
  • Select Expenses, Check or Bill under Vendors heading.
  • Select your subcontractor as a vendor.
  • Fill out the remaining fields of the vendor invoice.
  • Select COGS or expense account under Account tab. (line 1, amount = $10,000).
  • Line2, select Subcontractor Retainage Payable account, enter negative amount (example = -$2,000).
  • The total amount should show $8,000.
  • Click Save and close.

See screenshot below for reference.

 

3. To run a Subcontractor Retainage Payable account report for various subcontractors:

  • From the left Dashboard panel, click Accounting.
  • In the Chart of Accounts, locate “Subcontractor Retainage Payable” account line.
  • Go to “View register” under Action column at the far right corner.
  • From the drop-down arrow, select the “Run Report” button.
  • Row/Columns at the top left, change “Group by” to Vendor (especially if you have multiple vendors with retainage balances).
  • Click Run Report.
  • This report will give account details by vendor balances.
  • Since you will need to track these retainage activities, click “Save customization” green button, located in the top-left corner of the report window and name it “Subcontractor Retainage” report and Save.
    Now, you have saved this report for future use.
  • Next time, when you want to run this report (Dashboard > Reports > Custom Reports tab > locate Subcontractor Retainage report and run the report).

See screenshots below for reference.

 

4. To make 20% Retainage balance payment:

  • Same as to enter vendor expense bill as above (step #2).
  • For an account, use Subcontractor Retainage Payable account. Example, $2,000. That will clear the account but do the account analysis on a regular basis.

See screenshots below for reference.

5. Run Report after 20% withheld paymentL
Follow step#3 above on how to run report.
See screenshots below for reference.

 

For “How to handle customer retainage retention in QBO” click HERE.

 
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