When allowing customers to make retainer payments, you’ll need to record them. Not all businesses use retainer payments. On the contrary, most businesses only require their customers to pay when their products or services are delivered. Nonetheless, retainer payments must be recorded. Assuming you use Quickbooks, you can easily record retainer payments in a few simple steps.
What Is a Retainer Payment?
A retainer payment is essentially a deposit. Customers can make a retainer payment to secure a product or service. If your business performs a service, for instance, you may want to require customers to make a retainer payment before you begin the service. With a retainer payment, you can rest assured knowing customers won’t back out of the service.
Steps to Record a Retainer Payment in Quickbooks
The first step to recording a retainer payment is creating a liability account. Liability accounts, of course, are used to track debts. Liabilities are debt, and retainer payments are a special type of debt. You can create a liability account in Quickbooks by selecting the “Settings” menu, followed by “Chart of Accounts” and then “New.”
For the “Account Type,” choose “Other Current Liabilities.” For the “Detail Type,” choose “Trust Accounts – Liabilities.” After saving the changes, you’ll have a new liability account, which you can use to record retainer payments.
You can now create a retainer item for the retainer payment. This is done by going back to the “Settings” menu and choosing “Products and Services.” Next, select “New” and choose “Service” in the information section. You’ll have to give your retainer item a name. You can enter any name for it, but it’s recommended that you choose a descriptive name. A name like “retainer payments” will allow you to easily identify it. After entering a name, click the “Income account” drop-down menu and choose “Trust Liability Account.” When finished, click “Save and close.”
How to Convert Retainer Payments Into Credits
Retainer payments, of course, are typically a partial amount of a customer’s total invoice. As a result, you may need to convert them into credits. You can convert a retainer payment into a credit by selecting the retainer item on the customer’s invoice. The “Product/Service field features an option to choose a retainer item. Keep in mind that you’ll need to enter the retainer payment as a negative value. Otherwise, it will increase the amount of the invoice rather than decrease it.
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