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Construction Expenses - Purchase Order with Retainage

Learn how to use Construction Expenses - Purchase Orders with Retainage in Aclarian to track withheld amounts, process invoice payments, and report retainage balances accurately.

Overview

The Construction Purchase Order with Retainage feature is available in the Production environment. This workflow allows clients to manage retainage directly within the Purchase Requisition and Invoice Approval with PO processes, helping improve accuracy and transparency for construction-related payments.

Important setup requirement

At this time, each fund ID must have a corresponding GL account with Retainage in the account name in order to use this feature.

This is a current system requirement. Aclarian is working to remove this restriction in a future update.

How the feature works

Construction Purchase Orders with Retainage are managed through the Purchase Requisition Form and the Invoice Approval with PO Form.

Purchase Requisition Form

When creating a new purchase order for a construction project, select Construction Expenses as the purchase order type.

After selecting this type:

  • Add expense GL accounts as usual
  • Use the Retainage Accounts section to assign the liability account for each fund
  • Enter the retainage percentage for each applicable fund

This setup determines how retainage is withheld and posted during invoice processing.

Invoice Approval with PO

When processing an invoice against a Construction PO, the form calculates and displays several retainage-related values.

These include:

  • Total Paid to Date, which shows all payments already made against the purchase order
  • Total Completed to Date, which is entered by the user
  • Current Gross Payment Amount, which is calculated by the system based on project progress

The form also displays a dedicated Retainage Accounts section showing the amount being withheld based on the retainage setup from the purchase order.

If a project phase is complete, the Pay Retainage Balance option can be used to release part or all of the retained amount.

Payment summary section

At the bottom of the Invoice Approval Form, a subtotal section summarizes the payment details.

This section includes:

  • Current Gross Payment
  • Retainage Withheld
  • Retainage Payout, if previously withheld retainage is being released

These amounts are used to calculate the Grand Total Payment issued to the vendor.

How retainage affects payments

The full gross amount is always charged to the expense accounts.

However, only the net amount, after retainage is withheld, is paid to the vendor.

The retained portion is posted to the Retainage Payable account until it is released.

GL posting behavior

When a payment is processed:

  • The portion paid to the vendor is posted to Accounts Payable
  • The portion withheld is posted to the Retainage Payable account

When retainage is released later:

  • The vendor is paid the retained amount
  • The Retainage Payable account is reduced through the appropriate debit and credit entries

Reporting updates

Construction Purchase Orders with Retainage are reflected in reporting.

PO Detail Report

The PO Detail Report includes retainage balances and retainage payments for Construction POs.

Payment Transaction Detail Report

The Payment Transaction Detail Report shows when retainage is withheld and when it is paid out.

While retainage is still being held, it appears as a negative entry in the report. Once paid, the report reflects the updated balance.

Example

Here is a sample retainage scenario.

A Construction PO is created for $50,000 with 10% retainage.

An invoice is then processed with $50,000 completed to date.

The system calculates:

  • Gross Payment: $50,000
  • Retainage Withheld: $5,000
  • Grand Total Payment: $45,000

In the GL:

  • $50,000 is charged to the expense accounts
  • $45,000 is paid to the vendor through Accounts Payable
  • $5,000 is recorded in the Retainage Payable account

When the retainage is later released:

  • $5,000 is paid to the vendor
  • The Retainage Payable account is reduced
  • Reports update to reflect the released retainage balance

Getting started

To begin using this feature:

  1. Create a new Purchase Requisition.
  2. Select Construction Expenses as the purchase order type.
  3. Enter the expense accounts.
  4. Assign the retainage accounts and percentages for each applicable fund.
  5. Process invoices against the Construction PO using the Invoice Approval with PO form.

Why this matters

This workflow helps clients:

  • Track retainage by fund and GL account
  • Automate posting to Retainage Payable accounts
  • Maintain visibility into retainage withheld and released throughout the life of a project
  • Improve payment accuracy for construction purchasing and invoicing

Summary

Construction Purchase Orders with Retainage give clients a structured way to manage retained funds throughout a construction project. By combining purchase order setup, invoice calculations, GL posting, and reporting, this feature helps ensure retainage is tracked clearly and processed accurately from start to finish.