Project Billing and RetainageLesson 8

Processing AP Bills with Retainage

Back to V300: Project Accounting for Construction

Lesson 8: Processing AP Bills with Retainage

Part 2: Project Billing and Retainage

Your company may need to withhold a portion of the contract amount until the construction work has been

completed, to assure that the vendor will satisfy its obligations and complete a particular project. This lesson explains how you can process bills with retained amounts and track retainage by document lines.

AP Bills with Retainage: General Information

In some situations, your company may opt to retain a part of the amount of an AP bill until the vendor’s work has been completed. In this case, to process the total amount of the bill, at least two bills are created in Acumatica ERP: the bill for which part of the amount is retained, and the retainage bill, which contains the retained amount to be paid.

Learning Objectives

In this lesson, you will learn how to do the following:

  • Create and process a bill with retainage held at the line level
  • Release the retainage from the bill
  • Enter a payment for a retainage bill
  • Pay the outstanding balance of an original bill for which retainage was held

Applicable Scenarios

You create a bill with retainage when it is necessary to withhold a portion of the contract amount until the work has been completed to assure that the vendor will satisfy its obligations and complete a particular project or project task.

          Retainage is not supported for AP documents created in a foreign currency.

The Processing Workflow of a Bill with Retainage

Typically, an AP bill with retainage goes through the following general steps during its life cycle:

  1. Entry of the bill with retainage and preparation of the bill for release: A data entry person creates the bill with retainage on the Bills and Adjustments (AP301000) form. The balance of this bill equals the sum of the extended costs minus the line discounts of the lines of the bill, with this subtotal reduced by the retainage amount. The total amount of the bill (which is shown on the Retainage tab) is the detail total amount plus the retained amount.
  2. Release of the bill with retainage: An accountant releases the prepared bill with retainage. This released bill is assigned the Open status, and it affects the balances of the selected vendor and the GL accounts.
  3. Payment of the bill with retainage: The accountant creates a payment on the Checks and Payments (AP302000) form to pay the bill with retainage and then processes and releases the payment. The system reduces the balance of the bill with retainage by the amount paid. When the payment is released, the balance of the vendor is reduced by the paid amount, and the GL accounts are updated. The bill with retainage still has the Open status.
  4. Release of retainage: To reflect that the work has been completed, the accountant releases the retainage for the original bill on the Release AP Documents (AP501000) form. The user can release a part of the retained amount or the full retained amount. When this retainage is released, a retainage bill with the Open status is created in the system. When the retainage bill is released, the system updates the balances of the vendor, the related GL accounts, and the unreleased retainage amount of the bill with retainage.
  5. Payment of a retainage bill: The accountant creates a payment in the system to pay the retainage bill. This employee then processes and releases the payment. The system reduces the balance of the retainage bill by the amount paid. The balance of the vendor is reduced by the paid amount, and the GL accounts are updated. If the full retained amount has been released and paid, the bill with retainage is assigned the Closed status, and its unreleased and unpaid retainage amounts are 0. If a part of the retained amount has been released and paid, the bill with retainage keeps the Open status. The system reduces the bill’s unreleased and unpaid retainage amounts by the retainage released and the retainage paid, respectively.
           For documents with retainage, the invoice rounding functionality, which is available when the Invoice
       Rounding feature is enabled on the Enable/Disable Features (CS100000) form, is not supported; that is,
       amounts in documents with retainage cannot be rounded.

    Open AP balances and unreleased retainage (retainage held) balances can be tracked at the AP bill level or at the line level, depending on whether the Pay by Line check box is cleared or selected, respectively, on the Bills and Adjustments form. By default, when you create a new AP bill, the system copies the level of the vendor to the bill —that is, it copies the state of the Pay by Line check box on the Payment tab of the Vendors (AP303000) form. If balances are tracked at the line level, payments are also applied to these AP bills at the line level. For more information, see Processing AP Documents with Retainage.

AP Bills with Retainage: Process Activity

This activity will walk you through the processing of an AP bill with retainage. This activity demonstrates the workflow with AP bills with open AP and retainage balances at the line level.

Story

Suppose that on March 15, 2025, the ToadGreen Building Group company hired a subcontractor to install air conditioning systems for the hotel being built. By the subcontract, $2,400,000 will be paid to the subcontractor for work and 10% of each payment will be withheld by the company until the related work is finished. Also, ToadGreen and the subcontractor have agreed that aer 30% of the work is done, ToadGreen has to release 10% of the retained amount. On March 25, 2025, ToadGreen receives the first bill for the completed work, which is 30% of the total work, in the amount of $720,000. A ToadGreen project accountant needs to enter a bill that includes the $72,000 retainage amount and then process a payment for the full bill amount. Aer the subcontractor reports about finishing a part of the work, the ToadGreen project accountant needs to release $7,200, which is a part of the retainage amount. Acting as this project accountant, you will enter and process the related financial documents.

Configuration Overview

In the U100 dataset, the following tasks have been performed to support this activity:

  • The following features have been enabled on the Enable/Disable Features (CS100000) form:
  • Retainage Support
  • Payment Application by Line
  • Construction
  • On the Vendors (AP303000) form, the PARKERS vendor has been created; the Pay by Line (Payment tab) and Apply Retainage (Financial tab) check boxes are selected for this vendor. In the Retainage Percent box (Financial tab), 10 is specified. On the GL Accounts tab, 28000 - AP Retainage is specified in the Retainage Payable Account box. In the Cash Account box on the Payments tab, the 10200TG cash account is specified for the vendor.
  • On the Non-Stock Items (IN202000) form, the HVAC non-stock item has been created.
  • On the Projects (PM301000) form, the HOTEL project has been created with multiple project tasks.
  • On the Subcontracts (SC301000) form, the subcontract for the PARKERS vendor in the amount of $2,400,000 has been entered.

Process Overview

You will create a partial bill for the subcontract on the Bills and Adjustments (AP301000) form. On the Prepare Payments (AP503000) form, you then will prepare a partial payment for the bill and process it by using the Process Payments / Print Checks (AP505000) and Release Payments (AP505200) forms. You will then review the retainage details of the processed AP bill in the AP Aging (AP631000) report. Aer that, you will release the retainage on the Release AP Retainage (AP510000) form and prepare the retainage document. Finally, you will process the retainage document and pay its balance.

System Preparation

To prepare to perform the instructions of this activity, do the following:

  1. Sign in to the system as a project accountant by using the bsanchez username and the 123 password.
  2. In the info area, in the upper-right corner of the top pane of the Acumatica ERP screen, make sure that the business date in your system is set to 3/25/2025. If a different date is displayed, click the Business Date menu button, and select 3/25/2025 on the calendar. For simplicity, in this activity, you will create and process all documents in the system on this business date.

Step 1: Create an AP Bill with Retainage for a Subcontract To create and pay an AP bill for the vendor, do the following:

  1. On the Bills and Adjustments (AP301000) form, add a new record.
  2. In the Summary area, specify the following settings:
  • Vendor: PARKERS
  • Date: 3/25/2025
  • Description: 30% of work for the subcontract
  • Apply Retainage: Selected
  • Pay by Line: Selected
  1. On the table toolbar of the Details tab, click Add Subcontract.
  2. In the Add Subcontract dialog box, which opens, select the unlabeled check box in the row with the subcontract to PARKERS and the $2,400,000 subcontract total, and click Add & Close. The system adds four subcontract lines to the bill.
  3. Modify the lines as follows to indicate that the bill is being prepared for 30% of the subcontract work: a. Leave the first line, with the HVAC subcontract - Phase 1 description, as it is, and make sure the Ext. Cost amount is 480,000. b. In the second line, with the HVAC subcontract - Phase 2 description, change the Ext. Cost amount to
  4. c. Remove the third and fourth lines from the bill by clicking each line and then clicking Delete Row on the table toolbar. Make sure that the bill balance is now 648,000, which is the total amount (720,000) minus the retained amount (72,000).
  5. Save your changes.
  6. On the form toolbar, click Remove Hold to assign the bill the Balanced status, and then click Release to release the bill. For each line on the Details tab, notice that the Balance column now shows the amount to be paid for each line (which is the line amount minus the retainage amount).

Step 2: Paying the Bill To pay the bill, do the following:

  1. Open the Prepare Payments (AP503000) form and specify the following settings in the Selection area:
  • Payment Method: CHECK
  • Cash Account: 10200TG
  • Vendor: PARKERS
  • Pay Date Within: Cleared The lines of the bill that you have created earlier in this activity appear in the table.
  1. Select the unlabeled check box for both lines, and make sure that in the Selection area, the Selection Total amount is $648,000.00, and the Available Balance amount is greater than the total amount to be paid.
  2. Click Process on the form toolbar.
  3. On the Process Payments / Print Checks (AP505000) form, which opens, click Process to process the only selected line, which corresponds to the prepared payment. The system opens a printable version of the check.
                    For the purposes of this activity, you do not need to actually print the document. In a
                production setting, you would click Print on the form toolbar to print the check before closing
                the browser tab.
  4. Close the printable check and return to theRelease Payments (AP505200) form, which the system has opened.
  5. On the form toolbar, click Process to release the AP payment. Wait until the processing has finished, and in the Processing dialog box, which opens, click Close.
  6. On the Bills and Adjustments (AP301000) form, open the AP bill for which you have processed the payment, and review the line-level balances. Both lines have an unreleased retainage balance in the Unreleased Retainage box, as shown in the following screenshot. Therefore, the bill retains the Open status even though both bill lines have been paid. Figure: Open bill with partial payment and unreleased retainage
       On the Applications tab, review the lines of the payment that you have processed. The amounts in the
   Amount Paid column of each line show how much has been paid for each line of the AP bill.

Step 3: Reviewing Retainage Details To review the retainage details of the processed AP bill, do the following:

  1. Open the AP Aging (AP631000) report form.
  2. On the Report Parameters tab, specify the following settings:
  • Report Format: Detailed with Retainage
  • Company/Branch: TBGROUP (inserted automatically)
  • Vendor: PARKERS
  • Age as of Date: 3/25/2025
  1. On the form toolbar, click Run Report. In the displayed report, the retainage amount held for the AP bill (72,000.00) is not aged, and is shown in the Unreleased Retainage column.

Step 4: Releasing a Part of the Retainage To partially release the retainage, do the following:

  1. Open the Release AP Retainage (AP510000) form.
  2. In the Selection area, select PARKERS in the Vendor box.
  3. In the Retainage to Release column of the table, for the lines that are displayed, specify the following amounts:
  • Line 1: 4800
  • Line 2: 2400
  1. In the table, select the unlabeled check box for both lines.
  2. Click Process on the form toolbar to prepare the retainage document. In the Processing dialog box, which opens, click Close.
  3. On the Bills and Adjustments (AP301000) form, open the prepared retainage document for the PARKERS vendor. Each line of the retainage bill has the project (HOTEL), project task (15), and cost code (15-700), copied from the original AP bill. Because the original AP bill was created with the Pay by Line check box selected, the retainage AP bill is also processed at the line level (that is, the Pay by Line check box is selected in the Summary area).
  4. Make sure the Balance in the Selection area is $7,200, and on the form toolbar, click Remove Hold to assign the document the Balanced status. Then click Release to release the document. The retainage document is assigned the Open status.

Step 5: Paying the Retainage Document To pay the retainage document, do the following:

  1. While you are still on the Bills and Adjustments (AP301000) form with the retainage document open, on the form toolbar, click Pay. The system opens the Checks and Payments (AP302000) form with the prepared AP payment.
  2. In the Summary area, make sure that the Payment Amount is 7,200.00, and on the form toolbar, click Remove Hold to assign the payment the Pending Print status.
  3. On the form toolbar, click Print/Process.
  4. On the Process Payments / Print Checks (AP505000) form, which opens, click Process to process the only selected line, which corresponds to the prepared payment. The system opens the printable version of the check.
  5. Close the printed check and return to the Release Payments (AP505200) form, which the system has opened.
  6. On the Release Payments form, click Process on the form toolbar to process the selected line. Wait until the processing has finished, and in the Processing dialog box, which opens, click Close.
  7. On the Bills and Adjustments form, open the original bill (which still has the Open status) and review the line amounts in the lines of the bill, focusing on the following columns:
  • Ext. Cost is the original amount that includes retainage ($480,000 and $240,000).
  • Retainage Amount is the original retainage amount of the lines ($48,000 and $24,000).
  • Amount is the original amount of the line less retainage ($432,000 and $216,000). This amount becomes the open AP balance of the line on release of the bill.
  • Balance is the current open AP balance of the line, which is the Amount minus the total amount of payments applied to the line ($0 in both lines).
  • Unreleased Retainage is the retainage currently held for the line ($43,200 and $21,600). You have prepared a partial payment for the subcontract and released a part of the retainage amount.