Invoicing so retention is not chased as overdue
Why a progress invoice paid net of retention ends up in overdue reminders, and how to invoice claims and retention so credit control stays accurate.
By Achekam · · 4 min read · For Construction businesses in South Africa, Nigeria, Kenya
The client's accounts department phones, irritated. They have received another automatic reminder saying an invoice is overdue. It is not: the balance is retention, held back exactly as the contract allows, and it will not be due until practical completion. They have had three of these e-mails this month, one for each progress claim.
This is one of the most common small embarrassments in contracting, and it is caused by how the invoice was raised, not by the reminder system. This article explains how it happens in Achekam, and how to invoice progress claims and retention so that only money genuinely overdue is chased.
How a full invoice paid net of retention turns into an overdue balance
Suppose a contractor invoices each progress claim for the full value of the work done. Issuing the invoice takes the next number in the sequence and posts debtors, sales and output VAT for the full amount. Default terms are thirty days.
The client pays the certificate, which is the value less retention. Achekam records the payment against the invoice, and a part payment leaves the invoice part-paid. The retention is now an open balance on that invoice, with a due date that has already passed or soon will. As far as the system can tell, the client is late.
Repeat that for every claim on a long job and the client's account shows a growing pile of small "overdue" balances, none of which is actually due.
What credit control e-mails to customers with overdue balances every day
Credit control is switched on for new workspaces. Once a day it e-mails overdue reminders, and a monthly statement, to customers with a balance. It never charges anyone, and it records whether each e-mail went out. By default reminders go at 7, 14 and 30 days overdue, with the invoice PDF attached, provided the workspace's e-mail settings work.
That is exactly what you want for genuinely late payers. For retention, it is wrong: the reminders go to a client who has paid everything currently due, and they undermine the reminders that matter.
Invoicing the amount due now, and raising the retention invoice when it falls due
The cleaner approach is to invoice only what is payable now:
- Each progress claim is invoiced for the value of the work on the certificate, less the retention the contract allows. That is the amount the client will pay against the certificate.
- The retention is not invoiced yet. It is tracked in a register, outside receivables, with its release dates.
- At each release, usually at practical completion and at the end of the defects period, you raise a retention invoice for the amount released.
The progress invoices are then paid in full and close. Nothing is left open to age, and credit control has nothing to chase until a real amount is late. When the retention invoice is raised, it starts its own terms, and a reminder at that point is legitimate.
Before you change method, ask your accountant two questions: whether retention must still be recognised as income as the work is done, and when VAT on retention falls due in your country. The answers may mean a month-end journal for retention earned but not yet invoiced.
Cleaning up invoices already issued at full value
If you already have full-value invoices with retention sitting open, you can tidy them. A credit note is issued from the invoice it corrects, in full or for chosen lines, so the retention part of each invoice can be credited, with your accountant's agreement, and the retention moved to the register to be invoiced on release. Tell the client before you do it, and send them the credit notes, so their records follow yours.
A retention register per job, with release dates
Keep the register simple and keep it current:
| Job | Claim | Retention on this claim | Retention to date | First release due | Final release due | Invoiced on release |
|---|---|---|---|---|---|---|
| Clinic extension | each claim | from the certificate | running total | practical completion | end of defects period | invoice number |
Set diary reminders for every release date. The common failure with retention is not over-chasing; it is forgetting to invoice it at all when it falls due.
Reading the age analysis once retention is kept out of it
Receivables in Achekam are aged into 0-30, 31-60, 61-90, 91-120 and over 120 days, with overdue totals. Once retention is kept out of the progress invoices, that ageing means something again: an amount over sixty days is a client not paying, not a contract working as designed.
The same is true of the statement of account. The server produces it as a PDF that can be e-mailed, and the screen says whether it was sent. A statement that shows only what is genuinely due gets paid more readily than one padded with balances the client knows are not yet payable. AccountingTools explains how an aging schedule sorts receivables into date buckets to show which items are overdue; it only works if the buckets hold real debts.
Clinics and practices face a similar problem with patient balances that are not yet due; patient account statements shows how they keep statements honest.
Before the next claim
Agree the method with your accountant, set up the register for every live job, and issue your next progress invoice net of retention. Advances recovered from claims need their own schedule, which setting a client's advance off against progress claims explains, and when the job ends, the register feeds straight into reconciling to the final account.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
