A retainer fee is an upfront cost paid by the customer for the services being delivered in the future.

Treasury is impacted (as you get the money). Meanwhile, a retainer is transparent in terms of sales turnover (as the service is not consumed yet).

So :

  • 🚩 Retainers make part of receivables statistics and report. A retainer will be visible within the Expected Payments page, and in the Overdue page.
  • ❗  Retainers are not taken into account to compute your sales turnover. 

Sales are impacted as the retainer is consumed.

Read our post over Unearned Cash  👉  https://medium.com/@kopilot/unearned-cash-dont-overestimate-your-ability-to-meet-commitments-351d6bc7df68

The consumption of your retainers is monitored in the "Monitor Unearned Cash" page.

When your company has received advances, it’s important for you to know at any time its level of consumption because:

  • a new advance might have to be claimed if the received advance is almost entirely consumed
  • a decision must be taken at the end of the financial period: should this advance be returned to the client or should be kept as a debt at the year-end?
  • an invoice must be issued if you deem that a part of the work may be “billed” and the advance may be recognized in whole or in part as turnover.

In your advances’ management, you have to consider:

  • still owing amount: this amount corresponds to what you may have to return to your customer if the work to be rendered had to stop.
  • the advance’s seniority: at maturity, the unused amount must be returned to its owner, in principle, your customer.
  • the advance’s consumption: Consuming its advances regularly reduces the cash flow risk by immunizing the consumed portion versus the risk of restitution.
  • the days of sales’ amount represented by the remaining sum: this is the risk to which you expose yourself in case you have to spend everything today.
  • Advance status: Your business may not start until the advance is paid.

General Rules

  1. A retainer is a debt to one of your customers.
  2. This debt may consist of one or more retainers.
  3. A retainer corresponds to a document requesting an advance of funds.
  4. Any invoice resulting from the retainer consumes it and reduces the remaining open amount.
  5. An invoice that drains money from a retainer is considered to have been paid immediately, since the funds have already been received.
  6. A retainer can only be closed when all the funds have been consumed, either because invoices have drained all the advance received, or because a credit note has been issued to discharge the debt.

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