How to Use the Construction Purchase Order with Retainage Feature

What Is This Feature?

Aclarian now supports Construction Purchase Orders with Retainage. This feature allows you to manage retainage directly within your purchasing and invoice approval workflows.

Retainage is a portion of a payment that is withheld from a contractor until a project or project stage is complete. It is common in construction contracts.

This feature is now live in your Production environment.

What Is Retainage?

Think of retainage like a deposit held in reserve. You owe a contractor the full amount for work completed, but you hold back a percentage until you are satisfied the work is done correctly. Once the project stage is complete, you release the withheld amount to the contractor.

Step 1: Create a Construction Purchase Order

1. Go to the Purchase Requisition Form
2. Select the Construction Expenses type when creating a new PO
3. Add your expense GL accounts as usual
4. In the new Retainage Accounts section, assign the liability accounts for each fund
5. Enter the retainage percentage to be withheld

The system will use this setup to calculate retainage automatically on every invoice processed against this PO.

Step 2: Process an Invoice Against the Construction PO

When you are ready to pay an invoice, use the Invoice Approval with PO form. The form will calculate the following for you:

• Total Paid to Date: all payments made against this PO so far
• Total Completed to Date: entered by you based on project progress
• Current Gross Payment Amount: calculated by the system based on progress to date

The Retainage Accounts section will show how much is being withheld on this payment.

At the bottom of the form, you will see a subtotal section that breaks down:

• Current Gross Payment
• Minus Retainage Withheld
• Plus any Retainage Payout if you are releasing previously held retainage
• Grand Total Payment issued to the vendor

What Gets Posted to the GL?

Each invoice payment creates the following entries:

• The full gross amount is charged to your expense accounts
• The net amount after retainage is posted to Accounts Payable and paid to the vendor
• The withheld retainage amount is posted to the Retainage Payable account

Example

A Construction PO is created for $20,000 with 5% retainage.

An invoice is processed showing $20,000 completed to date.

In the GL:

• $20,000 is charged to the expense accounts
• $19,000 is paid to the vendor through Accounts Payable
• $1,000 is recorded in the Retainage Payable account

When the retainage is released later:

• The $1,000 is paid out to the vendor
• The Retainage Payable account is reduced
• Reports will show the retainage entry reversed and total expenses will remain accurate

Step 3: Release Retainage

When a project stage is complete and you are ready to release the withheld amount, use the Pay Retainage Balance option on the Invoice Approval form. You can release retainage partially or in full.

Reporting

Two reports have been updated to include retainage information:

• PO Detail Report: shows retainage balances and payments for Construction POs
• Payment Transaction Detail Report: shows when retainage is withheld and when it is paid out

Note: The withheld retainage amount will appear as a negative entry in the Payment Transaction Detail Report until it is paid out. This is expected. Once retainage is released, the negative entry will be reversed and your total expenses will reflect the correct amount.

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