Tag Archives: Project

How to record retention in QuickBooks?

Retention is money withheld by the customer of a contract (project); protect the customer against incomplete or defective works. The retained sum is usually released to the supplier once the project ends or after the warranty period.

Assuming the sum withheld is at every stage of the progress claim. For a progress claim of $100,000 with 5% retention, the journal behind the sales invoice will be:

DR. Accounts Receivable $101,650
DR. Retention Receivable $5,000
CR. Sales $100,000
CR. GST Payable: $6,650

To record the retention in QuickBooks Online, first, you create a retention item (can be a service item) and link it to the retention receivable (a current assets account). Then, use it in the invoice with a negative value to reduce the invoice total (the objective is to reduce the receivable and not the revenue).

To view the retention receivable, you may run a report for the retention receivable account (from the Chart of Accounts) and group it by the customer to check the retained sum by the customer or for a job (if you are using the project feature in QuickBooks Online).

QuickBooks Retention Report
Retention – Quick Report

You may then issue an invoice to the customer for the retained sum once the project ends. The journal for the invoice:

DR. Accounts Receivable $5350
CR. Retention Receivable $5000
CR. GST Payable $350

QuickBooks Online is a small business account system suitable for small businesses and SOHO. Although it does not have a complex project accounting feature, it should be sufficient for basic project tracking.

Note:

  1. The letter of claim is not a tax invoice, and the retained amount has to account for the GST upon payment received or invoice issued, whichever earlier.
  2. To create an account in QuickBooks Online (QBO):
    • Click on the Gear icon and select Chart of Account from the list.
    • Click on the New button in the Chart of Account list to add an account.
  3. To create an item in QuickBooks (QBO):
    • Click on the Gear icon and select Products and Services.
    • Click on the New button in the Products and Services list to add an item.

Monitor funds allocation in accounting software

Software: MoneyWorks accounting software

Monitoring of fund allocation is never easy, especially when there are multiple funds and projects. A school may receive funding from MOE (Ministry of Education) to upgrade the computer lab, pocket money fund for the children, or allocate a fund internally to maintain the canteen. An easy way of tracking the funding is using the job feature in MoneyWorks, create a job code for each funding and tag it to a ‘client’, the organisation that giving the fund. Assuming you received a few funding from MOE in the year 2018, you may use a job code such as MOE1801, MOE1802, etc. to differentiate it.

Job Code

Use a Receipt transaction to record the fund received and tag it to the job. The entry debits the bank and credits the income account. Then, use the job code in payment or purchase invoice transaction when there are expenses related to the job. Next, use the Job Allocation report, a new report in MoneyWorks version 8.1.5, to monitor how the fund has used once related entries have recorded.

tag transaction to job

Unlike external funding, internal funding requires to move the fund out from the bank and receiving back to indicate as a fund ‘received’ for the project. In the payment transaction, issue the fund out from the bank to a Fund Received income account, and then use a negative value on the second detail line to move the money back to the bank and tag it to the job. The payment debits the Fund Received and credits the Bank, and then debits the Bank and credit back to the Fund Received account. The transaction gross is zero as these are memo entries, you will see a deposit and a withdrawal when reconciling the bank which you can knock off without affecting the book. Similar to the external funding, you record the project related expenses via the payment and purchase invoice transaction and tag it to a job; then use the Job Allocation report to monitor the fund.

Internal funding

Job Allocation report helps monitor fund received and expenditures of both related expenses and assets purchased. Do consider upgrading to version 8.1.5 if job tracking is your priority.

Job allocation report

MoneyWorks accounting software update version 8.1.5

Cognito has released MoneyWorks version 8.1.5 update. The complete change history (a list the bug fixes and improvements) of version 8.1.5 is available at Cognito website.

A project-based business may consider using the job tagging feature in MoneyWorks to track the profitability of each job. You can tag a job code to the income and expenses, and then use the new job allocation report which comes with the new 8.1.5 update to serve as cost control and monitor the profitability.

For a non-profit organisation such as charities and schools may use job tagging feature to track project like upgrading facilities or social works, and use the job allocation report to monitor how they have used the fund which given by the parent or government body.

Check with your MoneyWorks consultant on how to use the job tagging feature for your organisation.