Don’t Lose Track Of Your Retentions
Retentions - an unwelcome & cumbersome part of life for nearly all trade sub-contractors. The theory is solid - retaining payment until works are shown to be default free should increase accountability, lock in delivery milestones. Fair enough…
But what about managing retentions in your financials? That can be a complete mess. Honestly, we have never really seen a business completely nail it. Even if they have a great job management system (Workflow Max, Simpro etc…) that tracks retentions, when it comes to their financials it’s a proverbial dogs breakfast.
On top of this – have you heard the one about the builder that called the subbie to remind them that their retention is coming up for payment? No. Neither have we…
Point being – retentions are your money. Your asset. You need to be across them to manage your job, cash flow, & business growth. If you are not, nobody else will be & you’ll be flying blind.
So what are some ways to manage retentions efficiently & effectively when it comes to your accounting software?
We recently had this chat with Claire Grimes of Paper Plane. Claire is an expert bookkeeper & specialises in running the records of trade & creative businesses.
Claire has devised methods for two types of retentions.
One, where you do not know how much your customer will hold back. Usually this where a retention is applied at the end of a job & you don’t know how much it’ll be until you pull together your final claim & invoice.
Two, where you do know how much your customer will hold back. Typically this is invoice by invoice arrangement.
Attached is a single page PDF running through Claire’s methods. What Claire is describing would work in Xero & MYOB, where the ‘tracking code’ (Xero) or job code ‘MYOB’ is used in invoicing.
Confused by retentions? Wondering why you're seemingly making ‘all this profit’ but the bank balance is bone dry? If so, get in touch. We’ll happily chat on the phone or come out & run through things in person. No charge & coffee is on us.
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