Client Retainers
A client retainer is when you take a deposit against work you will perform. Typical used when you sell a service by the hours worked, web design, legal, etc. You accept money in advance of work, so that value is a debt you owe, but it is also money you need to deposit.
On a sales receipt, I would use an “Other Charge” item (lets call it ‘retainer’) and point it to a current liability account for client retainers. You can set the other charge item for the hourly rate you charge (lets say $250/hr). That gets the pre-paid deposit on the books as a liability and the money will show up in undeposited funds.
Then you should have a service item for hours worked at the rate of $250/hr (sales price = $250).
When you invoice for hours worked, enter the service item an the number of hours worked (lets say 2 at $250/hr).
That gets the charge on the invoice for a total of $500. Then enter the other charge item retainer and enter a negative and the number of hours worked (-2 for 2 hours worked in other words at $250/hr), that gets a negative $500 and the invoice total is zero. And if you worked more hours than the retainer then the invoice will show an amount due.
QB will take the $500 out of the retainer liability account and send it to the sales income account. No money will show up in undeposited funds since you already have the money and all this does is reduce the liability and increase sales.
There may be a better way, and if there is I hope someone chimes in with it, but since QB lumps all retainers in one account there is no way to tell when a particular client has used up their retainer. What I do is create a sub account under the retainer account for each client and put their deposits in their account. It means I have to check the balance in their account before billing - major pain - but I haven’t found a way around it.
