Dynamics 365 – Managing Customer Retention in Project Management and Accounting

Did you know you can automate customer retention in D365 Project Management and Accounting?  Why yes it is so! 

What is Customer Retention you ask?  Well, I can tell you!

Customer retention is an amount of the customer invoice that is deducted from the customer invoice and held outside of the normal accounts receivable.  It is sometimes used as a means to ensure delivery of the project on time and with high quality.  A financial guarantee for the customer in the fact that a negotiated percentage is held back and not invoiced until certain conditions are met such as milestones or a percentage completion.

Further, once that milestone or percentage completion is met, the customer can be invoiced for the retained amount, or a portion thereof.

Creating a Customer Retention Term

Because the percentage to be retained at the time of customer invoice can vary from customer to customer or project to project, the terms are configured and assigned to the project contracts as needed.  When an invoice proposal is generated, the terms are automatically applied to the invoice proposal.

The terms are easily applied to the project contract.

A category must be created which is used for customer retention.  To do this, create a Fee type category for projects and check the Customer payment retention option.

Invoice Proposal

The Invoice proposal is generated at the appropriate time, and the system automatically determines what the customer retention amount should be and applies it to the invoice.

When the invoice proposal is posted, the amount is posted using the posting transaction of Customer payment retention receivable.  This account is configured as part of the General ledger Accounts for automatic transactions.

Reviewing Customer Retention

The Customer retention transactions can be reviewed in multiple ways.

Option 1:

From the project, navigate to Manage > Posted transactions

Option 2:

From the Project, navigate to Control > Customer retained payments

Option 3:

From Project management and accounting, navigate to Inquiries and reports > Retention inquiries > Customer retained payments.

Request Payment

Once the agreed upon milestone or percent complete has been reached for the project, an invoice can be generated to request payment of the retention amounts from the customer.

Navigate to the Project or Project Contract, and to the Maintain tab.  From there navigate to Request retained amount.  All of the Customer retention amounts will be displayed.

The Create invoice proposal option will create an invoice proposal for the selected lines, so not all retained amounts must be requested at the same time.  Note the retention release amount which will be moved from the customer retention account to Accounts receivable when the invoice proposal in posted.

Potential Functionality Expansion

We at Ellipse Solutions, recognize that the standard Dynamics 365 functionality does not always meet all of the business requirements.  Some of the examples include handling large volumes of transactions or unique contractual obligations (sometimes sellers can be very creative).  In such cases, there may be a need to extend the standard functionality to meet those requirement gaps.  An example of such a modification might be to give the user the ability to modify the amount of customer retention to be requested.  Out of the box, the user can utilize the project transaction adjustment to change the retention amount of transactions, but that process may not be efficient for when the number of transactions is very high.

Have other Microsoft Dynamics AX inquiries or needs? Visit our Help Desk for AX page to see how our experts can help!

For more information please contact Ellipse Solutions at info@ellipsesolutions.com or by calling our corporate office at (937) 312-1547.