Payment Retentions

imurphy

In some industries there exists the concept of 'payment retentions' whereby a client withholds a percentage until completion of a project.

Having only come across this in Spain I don't know what this is called in English. Does anyone know what this is called?

Also, naturally enough, does Navision can handle this type of billing out of the box? Having dug around I get the impression that it does not.

The idea is that for an invoice of 100,000eur the client could withhold 5%. This 5000 will then be the last invoice on completion of the project.

Ian

David_Cox

Not "out of the box", but Retentions are common in the Construction Industry, and there are some Construction add ons out there for Navision.

Try a Google search and you may find someone that has a Retention Module.

Not sure if you have it right about the last Invoice, In the UK you would Invoice at milestones or stages and for each Invoice withold the 5%Retention when payment is made, so lets look at one standard way, you could Invoice the full staged amount and you could just use the standard payment Discount of 5% with a term of say '6M' and claim that when you pay your Vendor.

And this does need to be done properly as Retentions should be paid back to the Vendor after the agreed period of time, so these Retentions need to be show as a Liability in the Chart of Accounts when reporting.

Then for the "Document Date" or "Due Date" you could use this as the Retention "Repayment Date" so you can produce some reports based on the Date and use this as the calculation and point of realisation, then just create a Credit Note to the supplier against the Discount (Retention) Account with the Payment Details, retentions are normally Payment based rather than Invoice.

It is late here so this is just one simple take on a solution!

David

imurphy

I'm doing this for a client who is a supplier in the construction industry. Their client will withhold x% until completion. Sometimes the retention is before the tax calculation, sometimes afterwards.

I wasn't sure if the name in english was 'retention' or something else like 'delayed payment'.

I did take a look at some of the add-ons out there but just the add-ons would cost more than this whole project has been budgeted at. Obviously because they do a lot more, but when you just need functionality X its a bit over the top.

Being the client and doing partial billing of the total amount means that the retention is simply a part of the total amount which needs to be the last invoice.

The (minor) complication comes when you consider that they have to bill percentages of each section of the project as it advances but not to exceed 100%. In a project with lines 1,2,3 you will gradually invoice 30% 60%, 90% and then (100%-retention), then the retention amount.

Doing it by simply calculating the withheld amount on each invoice and adding it as a deduction may be the easiest way to go.


Ian

David_Cox

Hi Ian

Another way is to add a Negative line on the Invoice and post this Value to the Retentions Account, this would give the Supplier an audit trail, and would allow you to calculate the retention on the Base Value per Invoice

David

imurphy

Adding a negative line didn't work as expected so in the end what I've done is:
- Added a sales and recievables parameter which is the retention account, which the user can choose.
- Added a retention field to the order form
- When the retention field contains a value the payment method must be of a type with billing marked
- I create or choose the 'Retention' payment code
- I modify the payment installments to reflect the retention (95% followed by 5% a year later)
- After posting I look up the GL entries and change account number on the line with the 5% to the Retention account chosen by the user and change the description to indicate that it is a retention

Seems to work, ok

Ian