I have 2 bank accounts – One is general funds and the other is for Client Advanced Fees (Retainers)
I would like to take a retainer from a client and track those funds with a Credit Note while holding that money in the bank account designated for such funds. Then upon invoicing for products or services, pay from that invoice from the Credit Note and also move those funds from the advanced fee bank account to the general funds bank account.
You don’t issue Credit note to client in this case. Credit notes serve different purpose (see Credit note - Wikipedia)
Anyway, when you receive money from customer in advance, there is an account called Customer advance payments. You want to categorize all receipts from customers which can’t be matched to sales invoices as Customer advance payments.
Then, when you finally issue sales invoice to customer, you can make journal entry to transfer the invoice amount from Customer advance payments account to Accounts receivable account. This is process of matching customer prepaid credit with outstanding amount on sales invoice so invoice can be marked as paid without anyone actually paying.
So this is basically of how you would do it. If you need step-by-step tutorial, I’ll put it soon in our “How to” guides.
Also you don’t need to maintain separate bank account for retainers. Manager will show you on Summary page under Liabilities how much your clients have paid you in advance. One of the benefits of maintaining an accounting system is that you can see at glance all your liabilities so you don’t end up spending money you can’t afford to spend. Having special bank account that has sole purpose of mirroring some liability account is just more hassle than it’s worth unless it is legal requirement (as it is case with real estate agents collecting rent on behalf landlords etc.)
Thanks for the help, a “How To” would have kept me from having to post here but isn’t needed for me to understand. Your help was clear and concise.
Thank-you for your time and a great software package.