Retention is when a portion of the contract price of the job is held and retained for a set term (usually 12 months) in case of problems.
If the builder/sub-contractor fails to remedy any found problems/defects on the job within this retention period, then another company may be called in and they will be paid from the retention monies that are held. The same may apply if the remedy works is carried out internally, and the cost of the work is then taken from the retention.
Retention parameters are, if applicable, held within the terms of a contract. The most commonly used rule is to hold 10% of each invoice/claim, until 5% of the contract price has been reached. Upon completion, 50% of the retentions held (or 2.5% of contract price) will be released and the other 50% of retention will be released at the end of the retention period.
The Zavanti ERP software suite includes the functionality to incorporate these parameters so that retention calculations on claims/invoices will automatically be calculated for the user and held in their appropriate General Ledger accounts.
Retention Release process for both Accounts Receivable and Accounts Payable have been revised to include a new retention release transaction for payment/receipt in the supplier/client enquiry window for any transactions processed in Version 10.4 onwards. Please note that any existing transactions prior to the upgrade to version 10.4 will release as per existing functionality.
Retentions for project related transactions include integration direct to the General Ledger. This user guide outlines the basic usage of the new retentions functionality and broken down into differing sections
1. Default Settings
2. Accounts Receivable Retentions
3. Accounts Payable holding retentions
4. General Ledger Journal examples