Product
Mail Books Ecommerce Assistant Integrations
Tools Pricing Partners Demo Security Q&A Download Log in Start free

Help › Invoicing

Hold back part of an invoice

Updated

Open this in Talisk HQ

On a renovation job the customer often keeps back a percentage until the deficiency period ends. You invoice $10,000, they hold 10%, and you can collect $9,000 today. You are still owed the other $1,000.

Recording that as a holdback keeps three things true at once: the income is counted in the month you did the work, the $1,000 still shows on your books as money owed to you, and your receivables list stops chasing you about a payment your own contract says is not due yet.

  1. Open the invoice.
  2. Choose Hold back.
  3. Enter the percentage the customer is keeping, or the exact amount.
  4. Send the invoice as normal.

The holdback is booked when you send the invoice, in the same step as the invoice itself. While the invoice is still a draft the holdback is only a figure on it: nothing moves in your books, you can change it freely, and the invoice screen says "Nothing is in your books yet" until you send it. That is also why Release holdback only appears once the invoice has been sent.

When the holdback defers its GST/HST, the release makes that tax payable, so it needs your account for GST/HST deferred on customer holdbacks. If that account's mark was taken off, HQ refuses the release and names the account to mark again on Chart of accounts (Mark it again), rather than release the holdback with its tax left off your return. The holdback account itself can be marked again only after that one.

To take the holdback off a draft altogether, choose Change holdback, then Remove holdback. Nothing is posted or reversed, because nothing was in your books yet. It is also the way forward if HQ will not send the invoice because of its holdback: remove it, send the invoice, and set it again only if your customer is still holding money back. Once the invoice has been sent, the holdback is in your books and comes back by releasing it, not by removing it.

The invoice your customer receives shows the full amount of the work, the holdback taken off, and Payable now, so they can see what to pay without having to work it out or ask. The total stays the full amount, because that is what you are owed: only the collectible part of it has changed.

Paying online from the invoice's portal link works the same way: a card payment through Stripe or Square asks for Payable now at most. However a payment arrives, HQ never puts it toward the holdback before you release it. If you record more than is payable now, HQ asks you to release the holdback first. If a customer sends more (an e-transfer, say), HQ records what is payable now and keeps the rest as that customer's credit; if nothing is payable now, confirming their payment waits until you release the holdback. Once you release it, the released part becomes payable.

The invoice screen shows the same three figures back to you, and keeps showing what is still held until you release it all.

An invoice from before you started in HQ

On an invoice dated before your books were opened in HQ, Hold back does not appear, and the invoice screen says why. A holdback from before that date belongs in the opening balances your books start from; if they already carry one for this invoice, record it as described below. An invoice dated on the day your books were opened, or later, can hold back as normal.

If a draft already holding something back is re-dated to before that day, HQ will not send it with the holdback. Choose Change holdback, then Remove holdback, or change the date back.

A holdback already in your opening balances

If you moved to HQ part way through a job, your accountant's opening balances may already split one of those older invoices: the part you can collect in Accounts Receivable, and the part the customer is keeping back in Holdback Receivable. Record that on the invoice so the two agree and you can release it later.

  1. Open the invoice. Its holdback card offers Record from opening balances.
  2. Enter the figure in Holdback Receivable (1120) for this invoice in your opening balances, and say why (for example, the trial balance your accountant gave you).
  3. Choose Record holdback.

You can do this yourself, or an invited bookkeeper with edit access can do it for you. Releasing the holdback later still needs full access.

Nothing is posted, because your opening balances already hold the money. From then on the invoice shows the holdback like any other, its Payable now leaves it out, and Release holdback moves it back into your receivables when the work is accepted.

HQ checks the figure against your opening balances before it records anything: Holdback Receivable must hold at least that much that no other invoice explains, and Accounts Receivable must hold that much less than the invoice's full balance. If either is short, HQ refuses and says what your opening balances do hold, so a figure that is too high (a typo, or one that includes tax) can't put your books out. A figure that is too low is recorded, and the invoice then says how much Holdback Receivable still holds that your opening balances don't explain; fix it with Remove this opening holdback and record it again.

It can be recorded once. If it was recorded by mistake, choose Remove this opening holdback on the invoice and record it again. That works while none of the holdback has been released and the invoice has not been written off or cancelled; payments on the invoice don't stop it. It is offered only on an invoice your opening balances carry (one brought in from your old system, not one that already has its own entry in HQ), in your book's own currency, while your Holdback Receivable account holds money no invoice explains.

HQ can't yet record deferred GST/HST with an opening holdback, so a release does not make any deferred tax in your opening balances payable; the dialog says so when your opening balances hold some. Ask your accountant how to move it. A release can't be dated before the day your books were opened in HQ. While the holdback stands, HQ will not move your opening date earlier than that invoice, and the invoice can't be cancelled (choose Write off instead).

The percentage is of the work, not of the total

A 10% holdback on $10,000 of work plus $500 GST holds back $1,000, not $1,050. That is what the lien legislation means by a percentage of the value of the work, and it is what the tax rules mean by part of the consideration.

Releasing it

When the deficiency period has passed and the customer accepts the work, open the invoice and choose Release holdback. That moves the money back into your ordinary receivables so it shows up as payable and can be matched to the payment when it arrives.

You can release part of it. Half at substantial completion and half at final is common, and HQ keeps count of what is left.

The release is dated today unless you give it another date. An earlier date is fine; a date after today is refused, because the work cannot have been accepted yet. A release can't be undone, and your opening balances can't then be dated on or after it: HQ refuses that date, names the invoice and gives you a date that works.

HQ will never release a holdback for you on a date. A deficiency period ending is a fact about the calendar; the holdback becoming payable is your judgement about whether the work was accepted. On top of that, releasing can change what you owe on a sales tax return, and nothing should do that because a clock ticked.

What you are owed in holdbacks altogether

Open Invoicing and stay on Overview. Once anything is being held back, a Holdbacks card appears beside Outstanding and Overdue, showing the total across every job and how many invoices it is spread over. A book with nothing held back does not show the card at all.

Click it to see exactly which invoices make it up, with what each one is holding in a Held back column. That list is filtered on the server, so it is the whole list and not just the invoices that happened to fit on one page. Use Show all invoices to come back out.

The same figure appears as the Holdback Receivable line on your balance sheet, under Ledger then Reports, and the two are built from the same calculation, so they always agree. Open that account's detail from the balance sheet when you want the ledger view: every line there is one holdback withheld or released, and each one opens the invoice it came from.

GST on a holdback

By default HQ charges the tax on the whole invoice straight away, which is the ordinary rule and always safe.

There is a narrower rule that can defer it. If the holdback is required by law or by a written contract, and the work is construction, renovation, alteration or repair of real property or a vessel, then the tax on the held-back part is not payable until the holdback is paid out or becomes payable. If that describes your contract, tick Defer the tax under the holdback rule when you set the holdback, and HQ will keep that tax off your return until you release it.

Leave it off if you are not sure. Charging the tax in the normal way is never wrong: it reaches the CRA a little earlier than it strictly had to. Deferring it when the rule does not apply means your return is short, and that is the error worth avoiding. If your work is not on buildings or vessels, or there is no written contract, the rule does not apply to you.

What it does not cover

Money you hold back from a subcontractor is the other side of this, and it has its own article: "Hold back part of a subcontractor's bill". It works the same way, on the bill instead of the invoice, and it sits on the opposite side of your balance sheet.

Good to know: A holdback splits the receivable, not the income. The work is done, so the full amount is revenue on the day you invoice it; only the part you cannot collect yet moves out of Accounts Receivable into Holdback Receivable. It is a percentage of the work, before tax, not of the invoice total. Releasing it is always something you do, never something HQ does on a date, because a deficiency period ending is not the same as the work being accepted. A holdback set on a draft is booked when you send the invoice, together with the invoice itself: until then it is a figure on the draft, nothing moves in your books, and there is nothing to release. A draft's holdback can be removed outright (Change holdback, then Remove holdback), which posts nothing; a sent invoice's holdback comes back only by releasing it. A holdback can only be recorded on an invoice in your book's own currency for now: on an invoice in another currency the option does not appear, because the holdback entry would put the foreign amount into your home-currency accounts. For the same reason, once a holdback is recorded on an invoice its currency can't be changed. A holdback also can't be set on an invoice dated before your books were opened in HQ: a holdback from before that date belongs in your opening balances. When your opening balances already split such an invoice into Accounts Receivable and Holdback Receivable, Record from opening balances records that holdback on the invoice once, with a reason, and posts nothing, so it can then be released as normal. HQ checks the figure against your opening balances and refuses one they do not hold. If it was recorded by mistake, Remove this opening holdback undoes it while none of the holdback has been released. This article is only the money your customers are holding of yours; the money you hold back from a subcontractor is the other article, "Hold back part of a subcontractor's bill".

Related