Payment Retention

In many businesses, customers retain a certain percentage of the total invoice amount and pay it later. This ensures the commitment and loyalty of their key partners like manufacturers, suppliers, or dealers.

In Zoho Books, you can enable payment retention and associate a rate with it. A portion of the total invoice amount will be set aside based on the retention percentage. Upon successfully fulfilling the contract terms, your customer will pay the retention amount as specified in the agreement. This can be further recorded via an invoice or a manual journal.

Learn more about how payment retention works in Zoho Books below.

Enable Payment Retention

To enable payment retention in Zoho Books:

• Go to Settings at the top-right corner of the page.

• Navigate to Sales and select Invoices.

• In the General tab, scroll down to Payment Retention and slide the toggle to enable it.

  

• Fill in the following details in the pop-up that follows:

  Field	Description
  Retention Name	The name for the retention.
  Rate %	The percentage that you and your customer have mutually agreed upon to be withheld.
  Tracked Account	Select the account under which the retention amount will be tracked. Note: If no account is selected for the retention rate, it will be tracked under the Retention Receivable account by default.

• Click Save and Enable.

  

The Payment Retention feature will be enabled.

Configure Payment Retention in Invoices

You can configure the retention amount while you create or edit an invoice. Here’s how:

• Navigate to Sales and select Invoices.

• Click + New in the top right corner and create a new invoice. Or go to an existing invoice and click Edit.

• Click Configure Retention Amount below the Total. The Configure Retention Amount pop-up will appear.

  

• Associate a retention rate from the drop-down. Zoho Books will auto-calculate the retention amount from the Sub Total (that excludes the tax) and display the Balance Due.

• Click Save and Continue.

  

Payment retention will be configured in the invoice.

Record Payment Retention

Later, when you receive the retention amount from the customer, you can record it in two ways in Zoho Books.

1. Create an Invoice for the Retention Amount
2. Create a Manual Journal for the Retention Amount

1. Create an Invoice for the Retention Amount

Before recording the payment, you must send your customer an invoice. Here’s how:

• Navigate to Sales and select Invoices.

• Click + New and create a new invoice.

• Enter the retention name under Item Details.

• Enter the retention amount under Rate.

• Select the tax as Out of Scope.

• Click the More icon near the Amount column and click Show All Additional Information.

• Click the Select an Account dropdown and choose the account used to track the payment retention.

  

• Click Save as Draft to send it to the customer later.

You can then collect and record the payment. Learn more about recording an invoice payment.

2. Create a Manual Journal for the Retention Amount

You can also record the retention amount received by creating manual journals.

To do so:

• Navigate to Accountant and select Manual Journals.

• Click + New Journal.

• Fill in the necessary details.

  Pro Tip: You can add the invoice number in the Reference# field to track which invoice the retention belongs to.

• Select the retention account as the Credit and the cash or bank account as the Debit account and enter the amounts.

  

• Once you enter these details, click Save and Publish or Save as Draft to publish it later.

The published journal indicates that the retention amount withheld by the customer has been paid. Learn more about manual journals in Zoho Books.

Other Functions in Payment Retention

Edit Retention Rate

To edit the retention rate after associating it to an invoice:

• Navigate to Sales and select Invoices.

• Go to the invoice and click Edit.

• Click Configure in the Retention Summary section*.* The Configure Retention Amount pop-up will appear.

  

• Select the desired retention rate or edit the amount to make the necessary changes.

• Click Save and Continue in the pop-up.

• Click Save on the invoice page, and the changes will be applied to it.

Delete Retention Rate

You can delete a retention rate if you no longer use it.

To delete a retention rate:

• Go to Settings at the top right-corner of the page.

• Navigate to Sales and select Invoices.

• Scroll down to the Payment Retention section. Click the Delete icon next to the retention rate you want to delete.

  

• Click Delete in the pop-up that follows to confirm the delete action.

The retention rate will be deleted.

Disable Payment Retention

If payment retention is no longer required for your business operations, you can disable it in Zoho Books. Here’s how:

• Go to Settings at the top right corner of the page.

• Navigate to Sales and select Invoices.

• In the General tab, scroll down to Payment Retention and slide the toggle to disable it.

  

• Click Disable in the pop-up that follows to confirm disabling this feature.

  Note: You can disable payment retention only after deleting the retention rates.

The payment retention feature will be disabled.