Retainer Invoice Example for Enterprises that Streamlines Your Billing Process

Retainer invoice example for enterprises

so let's go ahead and move on to working with retainers when you do with retainers you're gonna be doing two invoices the invoice that you use to tell your customer to pay you the retainer and the invoice that you use to tell QuickBooks that you have consumed that retainer the combination of the two are going to be the full work so please think about this one invoice is just for the retainer one invoices for the work - the retainer and for as long as there is a retainer available on file you're going to be using a retainer item to track this so the first English looks like this is a retainer and the dollar amount and the second invoice will look more like this where you actually see the things that you're charging for whatever it is right hours copies stamps billable expenses and then you're gonna see a negative amount at the end making the invoice essentially zero what this will do is it will move the retainer from the retainer liability on the balance sheet and into your revenue that's essentially what that's doing and at the end at the end we're gonna run the retainer report and kind of see how to tell which customer has what in retainer on file okay you can also run a retainer liability summary report and it's gonna be a custom project for this so we're gonna do a sales by customer summary and only pick that item and that's how we're gonna be able to know across the board all the customers that have a retainer on file okay so that's the example that we're gonna do so let me switch over to QuickBooks no I wasn't it that was it okay perfect so we're switched over on to QuickBooks here and let's talk about setting up a retainer so the first thing we're gonna do is we're gonna click on the gear menu and then we're gonna click on products and services in here I created an item called retainer I'm gonna click on edit so I can show you what it has it's just basically called retainer that's really all it is and I have the income accountant I'm doing air quotes here the income account is actually on an income account is an other current liability account called retainer liability okay so you have to do that you have to create the retainer liability now you also have to make sure and this is sort of a side component of this you have to make sure you have a separate bank account which is a trust account which is where the money physically goes into okay the the money portion where the money goes has nothing to do with this item this has to do with the accounting effect of the retainer which is hey I received some money that is not income it's a liability I'm going to turn it into income eventually the yeah the bank account the trust account is a different entity a different concept altogether okay so we'll talk about that pretty soon okay so we have an item called retainer and that's going into retainer liability which is an other current liability I'll click on save and close so once the item is set up then I can start invoicing so let's say I want to go into my customers here real quick let me go into my customers and let's pick this customer here let's pick the xyc Corp customer that's in here which doesn't have any invoices so far we cannot cancel that one and let's say we're going to go ahead and collect a retainer for this customer so we're gonna create a new invoice just for this customer and we have to make sure that we use the correct project now you have two options in this case you could invoice the entire customer and then apply it to multiple projects to simplify I'm gonna actually gonna invoice the project itself so I'm gonna use the project itself and then I'm gonna take a retainer of $3,000 okay so here on the class I'm gonna use documents which is the class that I'm using for formation documents contracts that sort of thing and let us say the attorney in this case is gonna be George Lopez okay so I'm gonna go ahead and on August 13 which when it is the data big customer came into my office I'm gonna send them a retainer for $3,000 and that's how we're gonna get started with the work so that's how we'll get started we'll do a retainer and invoice for the retainer and and that's it I don't have to do anything else so I click on save and close eventually I will get paid right so I'm going to go into receive payment most of the times I pay on the spot right depending on the relationship we'll pick our customer here they say only on the third team our customer gave us a check check number one one five five and it's gonna be deposited into a trust account just for the sake of this example I'm going to create another trust account so I'm like you trusted him I call it trust for retainers so let's say for example that this attorney has a trust account for retainers and then I trust account for something else that is possible or some attorneys like to have multiple trust accounts although it's not the not the case but I created a separate bank account called trust for retainers and that's the trust account in which I'm going to use to receive my customers money from invoices that I haven't earned yet okay so I'm going to go ahead and click on save and close now here's a comment which I think it is a really really good comment what happens if the and actually let me do that example I love your comment Elizabeth and the question what happens if they pay you with a credit card and the money goes straight into the operating account then you would just do a transfer okay let's say let's do that example let's say they pay me 50 hundred dollars in check and fifty hundred dollars with a credit card so the check is gonna go straight into the trust account okay so we're good to go they 15 lakhs will go straight into the the the trust account let's say that the the credit card I'm gonna pick the same customer here let's say they pay me with a credit card now the other 1,500 that goes into the operating account so I'm gonna click here operating account okay so for whatever reason I'm merchant account is set up to hit my operating account not my trust account so the money is actually going into the wrong account because this is this is retainer money so retainer money should never ever go into an operating account but for whatever reason my merchant account is tied to my operating account that's possible we can do that so I got the credit card I swiped it and the money went into my operating account I must immediately I'm gonna click Save and close I have to immediately do a transfer and physically transfer the money or not immediately when the money comes in physically transfer the money from the operating account into my trust for retainer because I should never ever ever have trust money or retainer money in my operating account so I'm going to click Save and close now the caveat to this is that some attorneys call retainers money that's not retainer money that's basically an upfront legal fee that contractually will not be returned to the cut to the customer and contractually you will not track time so let's say for example I'm an attorney and I say I'll tell you $25 flat fee to do this work so my attorneys run fully used the term retainer to talk about that but has nothing to do with a retainer because a retainer in theory is money they give you then you consume the hours consume the charges in charge against the retainer and that money's not yours until you can prove that you consumed it if you charge a flat fee as an attorney that's not a retainer even if you call a retainer and I had a fight with attorneys all the time wait they say yeah I took a flat fee retainer for 2,500 that doesn't make any sense okay so you got to make sure the terminology is correct for this concept to work right it's just not gonna work if you don't make sure of that anyway I'm gonna go into reports and I'm gonna click on balance sheet and notice that I have in my bank account called trust for retainers I have my three thousand dollars there that's what it's supposed to go and in my retainer liability I have thirty one hundred because I I could have other transactions sitting in there too that's probably what the case is so I'm gonna click on the thirty one hundred dollars in there and then I'm gonna click on group by I'm gonna grip it by customer so I'm gonna group it by customer and then click on run report and you can see all the monies that are affecting my my account in this case I'm gonna go ahead and delete a couple things that were here before this is me preparing for the work here so I'm going to delete everything else that's in here just so we can look at the one transaction that we are that we're working with so I'm just gonna leave that one invoice that's hitting my retainer that's a total money that I owe to my customers on retainer it's just that three thousand dollars and that's it okay then let's say I'm going to go ahead and invoice this customer so I'm gonna go ahead and invoice my customer and I'll pick my project here I'm gonna click at all here so let's say for example this is what the invoice is gonna look like then at the end what I'm gonna do is I'm gonna add one more line this is the kicker here I'm gonna have one more line to retainer and then I'm gonna make this amount negative the same total amount I have the negative nine 4875 as a line in the retainer so we got a retainer now we have negative nine forty eight point seventy five okay so once this is done the invoice 948 I think it was enough seven years then once this is done the invoice is gonna net to zero and that's what it's supposed to do it's supposed to a and that's zero and then the invoice invoicing process in this case will be complete in the description I will put here invoice eight thirteen twenty nineteen number and now this is a bit it is a bit redundant but I like to put sort of the invoice number here and the date of the invoice so I'm gonna click on save so I post an invoice number which is 1 1 0 1 and then go back and put it here in the description so I'm putting invoice 813 1 1 0 1 and then I'll click on save and close so that way that will do is essentially when I go back into reports and I go back to balance sheet and then go into my retainer liability I can see exactly what's in my retainer liability so I'm gonna click on that and my balance on my retainer liability is 2050 1.25 now once I created the invoice and I have charged it against the retainer what I need to do now is I need to transfer the money from my trust account from my trust for a retainer account into my operating account because I officially have earned the money so typically what you do is you want to make sure that your retainer liability account matches your trust account balance in this case all my trust for retainer account balance I mean this one too to avoid any additional confusion here because I had some additional things done before the webinar so I just got this trust for retainers account with $3,000 and my retainer liabilities 2051 so at this point I'm just going to transfer that difference into my operating account so I'm going to go here into transfer I'm gonna go from my trust for retainers into my operating 940 8.75 I can put here invoice 1 1 or 1 X Y C Corp now this memo is not necessarily the attorneys that I work with are obsessed with memos and they put in every single memo every single thing in theory you don't have to because you know the money is accounted for based on that retainer but it will be valuable to at least have the invoice number there to know exactly why the money is being transferred so I'm gonna click on save and close and now my trust account for retainer matches my retainer account a hundred percent so I'm gonna create an invoice here and do another retainer to a different customer so I'm gonna pick a different customer here and then I'm gonna do a retainer and let's make this one sixty-five hundred and I'll date this August first I'm gonna click on save and new but then I'm gonna invoice the same customer some work so I'll pick here hours and let's say we're charging ten hours or $400 a piece and we're gonna retain we're gonna do the negative retainer here so we can charge against a retainer so I did two invoices essentially with retainers because I want to show you multiple lines in there so I'm going to click on save and close and then once that invoice is created remember my retainer liability account needs to match my trust for retainer account so I should have received dollars for that 6500 and I do want to remind you or something - don't create retainer invoices if they don't pay you okay so so if the customer doesn't pay you delete the invoice or just leave it in estimate mode don't create the retainer invoice until the customer pays you because you're gonna inflate the retainer liability account in vain so not supposed to do that so I'm immediately receiving the money for that the retainer as well save and close so I got my transfer retainer which is eight thousand five five one and my retainer liability four thousand five five one the reason why that's off it's because I'm supposed to make that transfer so I'm gonna click here on customized reports here real quick and I'm gonna go to filter and actually not not not that yet let me do the transfer first let me do the transfer so let's create the transfer let me show you one more thing and go from my trust account to my operating to account for the four thousand dollars so I'll do one one zero three whatever it was and Hector Garcia okay so I'm trying to frame the money because I earned that and then some people like to use a self receipt instead of an invoice for retainer you can do that and that's totally fine I'm actually I encourage that quite often as well but but for the people that like for the document to say invoice then obviously you will have to use the invoice itself but if you use a sales receipt instead of an invoice then you're forced to create it and receive the payment simultaneously so you don't ever run into the situation where by mistake by mistake you create the invoice and leave the in was open and and mess something up in the in the process okay so now I gotta always make sure my trust account matches my retainer liability now I'm gonna show you one thing here which is when I click on within a liability and click on group by customer we can easily see that there are 45 51 white customer it belongs to but this is going to become a really big list as you add more customers to the list so I'm going to show you a trick to have a summary report for the retainer balance by customer so and this is really a workaround so we're going to go to reports and then we're going to look for sales by customer summary so we're the sales by customer summary okay and it's going to show you me all my sales I'm gonna put here date all and click on run report and then on the sales by customer summary I'm gonna click on customize go into filter go into products and service and pick retainer so by doing that I'm going to show a report of only my retainers and click on run report really important that you're doing all dates up here so when you do this you can actually have a summary retainer reports or quickbooks online doesn't have a custom summary report but this is the best way to do that so let me click on customize go to header and footer I'm gonna call it retainer balance by customer click on save I think and click on save and now when I go into reports and I go into custom reports there's my retainer balance my customer run it and then you can automate it automatically email it to the lawyers whatever happens to be you