The basic idea when working with retainers is that when you bill someone for a ‘retainer’ you ‘owe’ your client work so it is a liability until you 1) use it against billable time, 2) charge it off as income if ‘unused’, or 3) return the ‘unused’ amount to the client.

To set up the process of receiving and tracking retainers, follow the steps below:

1. Go to Setup -- Preferences -- System Tab and select the Preference "Turn on Category Tracking" and select “Categories are ‘Not Required’ on All Transactions".
2. Go to Lists -- Categories and create a new Category. (Tip: Use the month and year for each case with the clients initials as the Category ID, then name the catergory the Clients name, this way you can get a balance sheet report for each client with their name or case on it.)
3. Create a Bank account for “Client Trust Account”.
4. Create a Liability account for “Client Retainer”. (Tip: if the case or work is less than a year then its considered a Current Liability, if longer than a year its considered a Long Term Liability)
5. Using the Time Billing module, go to Activity List and create a new activity called “Client Retainer”. Select Non-Hourly and Chargeable. Link this activity to the liability account in Step 4.
Note: you will receive a warning that an activity is usually linked to an income account, select okay and continue.

To Receive and Track the Retainer, follow the below steps:

1. To create an invoice for your client’s retainer, go to the Time Billing Command Center and select “Enter Activity Slip”. Enter the employee assigned to the work, the client, the activity ‘Retainer”, enter 1 unit and the amount of the retainer in the Rate Field. If you are using jobs, you can assign a job and notes as well. Select Record.

2. From the Time Billing module at the Command Center, go to “Prepare Time Billing Invoice”. Select the name of the client and select OK.
3. Bill the total amount for the Retainer and select “Prepare Invoice”.

4. The invoice will appear, enter the Category and select Record.
5. From the Sales Command Center select Receive Payments.
6. In the top left of the window, select Deposit to the ‘Client Trust Account’ created in Step 3 of the set up process.

7. Enter the total Amount Received, the method of payment (entering in details if preferred), then apply the amount received to the invoice listed. (This will give the client a bill for the retainer, pay the Accounts Receivable, and establish the Liability.)
8. Record activity slips for all regular work being completed. (Activity for regular work links to the Income Account)
9. At the end of each month, go to the Timebilling Command Center and select Prepare Time Billing Invoice. Bill for the activities accumulated so far, then select Prepare Invoice.
10. On the invoice enter the date you are preparing the invoice for, -1 in the unit column, ‘Retainer’ for the Activity, enter the total amount of this invoice in the amount column. If you are using Jobs, enter the job number for each amount. This will cause this invoice to have a ‘zero’ balance. Enter the client category. Click the print button to print this invoice. You will receive a message that the invoice will be recorded before it is printed. Select OK.
11. Continue Steps 8-10 until the retainer is complete.
To get a current balance of the clients trust account, go to the Reports Menu, select Index to Reports, select the Accounts tab. Go to the Categories section and select Balance Sheet. Customize the report for the Clients Category then select Display. This report will display the current balance of the trust account, the Client Retainer liability account for the client, and the amount that was transferred into the regular checking account. Also, the amount of Retainer that was used will be shown in the Current Earnings account.

Note: during the course of time that this work for the client is done, if money needs to move from the Client Trust account into the regular Checking account to have access to this money, go to the Accounts Command Center and select Transfer Money. For each transfer be sure to enter the category for the client.

How To Settle any “Unused” retainer amounts

If your agreement with the client states the client will forfeit the ‘unused retainer’ follow the steps below:

1. Create an activity called “unused” retainer, it will be Non-Hourly and Chargeable. The linked income account will be the preferred income account.
2. Enter an activity slip for Client Retainer, enter the unit as -1 and the amount will be the remainder of the retainer. Then record the activity slip. Enter the job if applicable.
3. Enter an activity slip for Unused Retainer, enter 1 as the unit and the amount of the unused retainer, then record. Enter the job if applicable.
4. From the Time Billing Command Center select Prepare Time Billing Invoice and select the client. Bill both activities in full and select Prepare Invoice. This will create a ‘zero’ balance invoice. The remainder of the retainer will be removed from the liability account and will post the unused amount into the appropriate income account.

5. Go to the Accounts Command Center and select Transfer Money. Record a transfer from the Clients Trust Account to the regular checking account for the amount of the ‘unused retainer’. Enter the client category and record.

If your agreement states the client is to be refunded the full amount of the ‘unused’ retainer follow the steps below:

1. From the Time Billing Command Center enter an activity slip for Retainer, enter the unit as -1 and in the amount enter the remainder of the retainer. Enter job if applicable. Select Record.
2. Select Prepare Time Billing Invoice from the Time Billing Command Center and select the client from the Work in Progress list. Select OK.
3. Bill the total amount and select Prepare Invoice.
4. This invoice displayed with show a negative amount. Be sure to assign the client category. Select Record.
5. This will create a credit in the amount of the unused retainer and will remove the unused retainer from the liability account. This credit can be found in the Sales Command Center in Sales Register under the Returns & Credits tab. This credit can then be refunded to the customer by selecting the credit and select Pay Refund. Before recording this refund, be sure to select the Client Trust account to pay the refund from.