Payment Retention

In many businesses, customers retain a certain percentage of the total invoice amount and pay it later. This ensures the commitment and loyalty of their key partners like manufacturers, suppliers, or dealers.

In Zoho Billing, you can enable payment retention and associate a percentage with it. A portion of the total invoice amount will be set aside based on the retention percentage. Upon successfully fulfilling the contract terms, your customer will pay the retention amount as specified in the agreement. This can be recorded by creating a claim invoice for the retention percentage in Zoho Billing or by creating a manual journal through Zoho Books integration.

Scenario: Aaron, the owner of a construction firm, secures a contract with Hugh for a residential tower project. The total cost of the construction is $4,500,000. Hugh retains 10% ($450,000) and makes an upfront payment of $4,050,000. He pays the retention amount upon completion of the project. Aaron then easily records this amount in Zoho Billing.

Learn more about how payment retention works in Zoho Billing.

Enable Payment Retention

To enable payment retention in Zoho Billing:

FieldsDescription
Retention NameEnter the name of the retention.
Rate %The percentage that you and your customer have mutually agreed upon to be withheld.
DescriptionYou can provide a description for the retention if required.
Receivable AccountSelect the account under which the retention receivables will be tracked.

Note: If no account is selected for the retention, it will be tracked under the Retention Receivable account by default.

The Payment Retention feature will be enabled, and a retention will be created.

You can create a new retention by clicking New Retention under the payment retention table or configure it while creating an invoice.


Configure Payment Retention in Invoices

You can configure the retention amount while you create or edit an invoice. Here’s how:

Payment retention will be configured in the invoice.


Record Payment Retention

Later, when you receive the retention amount from the customer, you can record it in two ways:

Create a Retention Claim Invoice

Before recording the payment, you must send your customer a retention claim invoice. To do this,

You can then record the payment for this invoice. Learn more about recording an invoice payment.

Create a Manual Journal for the Retention Amount

Prerequisite: You must integrate your Zoho Billing organization with Zoho Books to create a manual journal for payment retention.

You can record the retention amount received by creating manual journals and track transactions of your organization under Chart of Accounts in the Accountant module from Zoho Books.

To do so:

Pro Tip: You can add the invoice number in the Reference# field to track which invoice the retention belongs to.

The published journal indicates the retention amount withheld by the customer is paid.
Learn more about manual journals in Zoho Books .


Other Functions in Payment Retention

Edit Retention

To edit the retention after associating it to an invoice:

Delete Retention

You can delete a retention if you no longer use it.

To delete a retention:

The retention will be deleted.

Disable Payment Retention

If payment retention is no longer required for your business operations, you can disable it in Zoho Billing. Here’s how:

The payment retention feature will be disabled.

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