Customer payment retention functionality in Microsoft Dynamics AX 2012

Customers always want to make sure that they get the best work/service done from their vendors successfully, in time with 100% quality ensured. In the professional services industries, most customers wants to retain/hold back certain amount/percentage of the payments, when they pay their vendors for a project work until the project completes.

Vendors can then discuss and validate with the customer about the quality and completion of the project work and request all the retained amounts upon agreement.

This functionality being fully automated in a simplified manner within the Project Management and Accounting module, empowers the list of several other capabilities of Microsoft Dynamics AX 2012 for services industries.

Powerful, Simple, Agile

Let us now understand, how this functionality works in dynamics AX 2012. The following are the setups required for the retention functionality to be working.

Setups required:

  1. Define a new Main account in the “Chart of accounts” for the Customer payment retainage receivables. Ensure that the posting type for this account is “Customer Payment Retention Receivables”.
  2. Setup the Customer Payment Retention Receivables account in the “Accounts for automatic transactions” form under GL module.
  3. Ensure that a number sequence is setup for the Customer payment retention term in Projects parameters form.

Number Sequence

4. Create and setup the new Fee project category for posting the customer payment retention amounts. Ensure that the Customer payment retention checkbox ins marked for this category.

Let us define the customer payment retention terms under the project management and accounting module. The payment retention term specifies the schedule for the payment retention. The customer may want the payment to be retained in one of the following ways.

– A certain percentage/amount on every invoice until the project completes.

– A certain percentage/amount on the invoices until a certain percentage of the project work is completed.

– Once you setup the retention terms, assign them to the Project Contracts, projects or the Billing rules(If you have implemented)

Now, when you process the invoicing for a project/project contract with payment retention term attached to it, you will notice the retention details, i.e the % of retention and amount in the invoice proposal screen and validate before you submit for approval.

The following shows the accounting entry when you post this invoice (Say $1000 with 10 % retention.

Customer payment retention receivable $1000 (Debit)
Project Invoiced revenue             $10000 (Credit)
Customer Balance $9000 (Debit)

When you request the retained amount after agreement with the customer, system will reverse the Customer payment retention receivable entry and debit the customer balance automatically.

Customer payment retention receivable                   $1000 (Credit)
Customer Balance $1000 ( Debit)

Dynamics Ax 2012 also provides you options to perform several inquiries on the customer payment retention detail,s under the “Inquiries” and “Reports” sections as shown in few screen-shots below. These will help users in analyzing the customer payment retention data in projects being in a central location/screen.




Feel free to contact me if you need more information in terms of setup and processing the customer payment retention.


Keep DAXING Smile


6 thoughts on “Customer payment retention functionality in Microsoft Dynamics AX 2012

  1. Had it not been for this blog, I would have never come to know this —-> “Define a new Main account in the “Chart of accounts” for the Customer payment retainage receivables. Ensure that the posting type for this account is “Customer Payment Retention Receivables”.

    Brilliant job !!! Thanks

  2. Wesam Shamasneh March 11, 2013 — 4:52 pm

    Very excellent work. Thank you.

    But what about the vendor retention, would you kindly provide us with the best practices in this regard.


    1. Hi Wesam,

      Thank you. Stay tuned for future posts.


  3. Nice blog! When requesting the retained amount is there anyway to just request part of it?

    1. Hi Busch,

      In standard AX, there is no way to request for a partial amount in one single retained line.

      You could customize this, but you need to be careful in considering all accounting happens correctly after you customize.


  4. Hi,first thanks for this support blog I really appreciate your cooperation, I have a few dudes about the retention terms, can I start an e-mail communication whit you?

    Sorry my English I’m from México

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