How to configure a subcontractor retainage process for Microsoft Dynamics AX 2012

Subcontractor retainage is the money that is owed by a prime contractor to ensure the agreed subcontractor work satisfies the contractual obligation.  It is an essential part of subcontractor invoicing cycle in the contracting and construction industry. To understand how to manage retainage in the context of a business process managed by Microsoft Dynamics AX, 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 subcontractors. This article will only cover retainage withheld from subcontractors. If you are looking for retainage withheld by customer, please read this earlier article.

1.1      Retainage withheld from subcontractors

A prime contractor withholds a certain percentage from each submitted subcontractor certified invoice based upon contractual obligations. These withheld amounts are released based on one of several possible factors including different phases or completion of milestones or amount of work performed or after completion of a warranty period.

1.1.1 System setup and configuration for a Subcontractor Retainage

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

1. Create subcontractor retainage accounts in your COA under the heading of Liabilities.
2. Setup a vendor retainage posting profile from "General ledger > Setup > Posting > Accounts for automatic transactions".