Invoice a retainer or an advance

Applies To: Project Operations Integrated with ERP, Project Operations Core

Dynamics 365 Project Operations supports retainer-based contracts and one-time advances. On a project contract, you can record a schedule of retainers or a one-time advance. However, recording at the project contract level doesn't immediately make a retainer or advance available for use. To use a retainer or advance on an invoice that actually charges the customer, you must first invoice the retainer or advance.

Complete the following steps to invoice a retainer or an advance.

1. Select Sales > Billing > Retainers and Advances.
2. On the Advances and Retainers page, use the filter to select the specific retainer or advance to invoice and mark it as Ready to Invoice.
3. Create an invoice either manually from the Project Contract list or detail page. The retainer or advance is shown on the draft invoice in the Advances and Retainers section on the Invoice page.
4. Confirm the invoice. This step makes the retainer or advance available for use. You can verify the invoice on the Retainers and Advances list page. For an invoiced advance or retainer, the available amount is shown in the grid.

Create a retainer or advance from the Invoice grid

You can create a retainer or an advance directly on an invoice.

1. On a draft invoice, in the Advances and Retainers subgrid, select New to create a new retainer or advance.
2. On the Quick Create page, add the necessary information, and then select Save. The retainer or advance is created on the project contract related to the invoice. The retainer or advance is automatically marked as Ready to Invoice and then added to the Advances and Retainers subgrid on the Invoice page.

Reconcile an invoiced retainer or advance

After you invoice a retainer or advance, use it to reconcile an invoice with time, expenses, milestones, or other project-based charges. The customer sees their invoice amount reduced by the retainer or advance amount used on this invoice.

On every invoice that you generate for a project contract with invoiced retainers or advances, Project Operations automatically applies the retainer or advance to the invoice.

You can see this application in the Applied Retainers and Advances grid on the Invoice page. The following table provides information about the fields on the Applied Retainers and Advances grid of the Project Invoice page.

Refund unused retainers

To use the refund unused retainers feature, enable the 'Refund retainers' feature flag.

Project-based engagements often start with retainers or advances that you invoice upfront. If a project completes with a remaining retainer balance, Project Operations lets you refund the unused amount either from a project invoice or directly from the project contract without creating separate corrective invoices. This capability simplifies financial closeout and reduces manual adjustments.

You can refund the remaining amount either from an invoice or directly from the project contract. In both cases, the refund is completed when you confirm the invoice.

Refund a retainer from an invoice

Use this option when you're already reviewing or creating a project invoice.

To refund a retainer from and invoice, follow these steps:

1. Open an existing draft project invoice, or create a new one from Billing hub. You can create a draft invoice even if there aren't any chargeable transactions, as long as you're refunding retainers.

2. On the invoice, go to Applied advances and retainers.

3. Select one or more retainers with an available balance.

4. If you need to refund a retainer that's not already part of the invoice, select Add to add the retainer with its available amount.

5. For a newly added retainer, you can perform one of the following actions:

   • Apply the retainer to invoice transactions. To apply the retainer, use Extended amount.
   • Refund the retainer.

6. To refund, select the retainer and choose Refund. The retainer is marked as Ready to refund. To cancel the refund, select Cancel refund.

7. Confirm the invoice to process the refund. The retainer status is updated to Refunded, and the amount is returned to the customer.

Refund a retainer from the project contract

Use this option when you close a project and no invoice exists yet.

To refund a retainer from the project contract, follow these steps:

1. Go to Sales > Project contracts and open the contract.

2. In Advances and retainers, select one or more retainers with an available balance.

3. Select Refund. The retainer is marked as Ready to refund.

4. Create a draft invoice, such as from Billing hub.

5. Review the refund in Applied advances and retainers, and then confirm the invoice to complete the refund.

Refund status at a glance