A retainer invoice is a type of commercial document used to request upfront payment (a retainer fee) from a client before services are rendered. This invoice serves to secure the service provider’s availability and commitment to the project or ongoing work. Retainer invoices also known as retention payments are commonly used by professionals such as lawyers, consultants, freelancers, and accountants, particularly for long-term or recurring services.
Key Characteristics of a Retainer Invoice:
Upfront Payment: The retainer fee acts as a deposit or prepayment to secure the provider’s services.
Liability: Payments received via a retainer invoice are initially recorded as liabilities, not revenue, because the services have not yet been delivered.
Legally Binding: The invoice outlines terms such as fees, scope of work, and payment conditions, making it enforceable in court if disputes arise.
Predictable Revenue: It ensures steady cash flow for the provider while guaranteeing service availability for the client
Vendor Side – Option 1 (using Sales Order) #
To book a Retainer Invoice for incoming upfront payment (Vendor side) in AccountingSuite, a Sales Workflow containing a Sales Order should be used (so the workflow starts with a Sales Quote, then Sales Order OR the workflow starts directly with Sales Order).
In the Accounting Settings, the Advances Received account should be filled. AccountingSuite standard Chart of Accounts offers account 20200 Customer Prepayments. User may prefer to create own account, for example Retainer Invoicing or similar. Important is, that the Category of the selected account should be Liability. This ensures compliance with the most common accounting frameworks.
Step 1 is to create either a Sales Order (generate from preceding Sales Quote or create from scratch). For a Sales Order, a custom print form may be developed under with a heading Retainer Invoice.
Step 2 is to generate incoming Prepayment from the Sales Order.
In the Customer Prepaymet doc, specify:
- Account where the funds are received;
- Amount received (which can be equal, lower or higher than the Sales order amount);
- VAT rate, if applicable;
- Advances Received Account will be filled automatically from the Accounting Settings, but may be changed if required. E.g. user may prefer to call this account Retained revenue or Unearned revenue.
This Document will Debit the specified Bank account and Credit the account specified in Advances Received Account.
Tax invoiced issued for prepayment may be issued if required.
Step 3 is to Generate the Sales Invoice from the Sales Order
All of the required information in the Sales Invoice will be filled automatically from the Sales Order. User may add or delete Items and their quantities if required.
On the Addtional tab, select the Apply options: Automatically, Manually or Not Apply. The Apply Customer Credits document will be created automatically.
Vendor Side – Option 2 (starting directly with Payment) #
Another starting point for this workflow could be the Payment document without any Sales order.