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Hold back part of an invoice

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.

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 TALISK_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, TALISK_HQ never puts it toward the holdback before you release it. If you record more than is payable now, TALISK_HQ asks you to release the holdback first. If a customer sends more (an e-transfer, say), TALISK_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.

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 TALISK_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.

TALISK_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 TALISK_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 TALISK_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 Talisk 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. 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".

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