How to configure the customer retainage process for Microsoft Dynamics AX 2012

Retainage is the money that is owed by an upstream party to a downstream party to ensure the agreed project work satisfies the contractual obligation. It is an essential part of the billing cycle in the contracting and construction industry. To understand how to manage retainage - also known as retention - in the context of a business process managed by Microsoft Dynamics AX 2012, this article will explore both the business rules and system setup behind the model.

There are two types of retainage - withheld "by customers" and withheld "from vendors". This article will only cover retainage withheld by customers.

Retainage withheld by customers

A customer withholds a certain percentage from each submitted approved project invoice based upon contractual obligations. These withheld amounts are released at different phases or completion milestones of the project.

System setup and configuration for a Customer Retainage

I am using the "USSI" Demo Company in Dynamics AX to configure customer retainage process for this article. The steps below explain how to setup and configure the system for customer retainage.

1. Create customer retainage accounts in your COA under the heading of an Assets.

2. Setup a customer retainage posting profile from:

"General ledger > Setup > Posting > Accounts for automatic transactions".