Retainer funding lets you collect money from a client through Ignition and add it to their retainer balance. You can then draw against that balance when you invoice for work you have completed.
Before this, the retainer balance in Ignition was a number you typed in by hand, and the funding itself was collected outside Ignition. With Retainer funding, the payment and the balance stay connected: your client pays a funding invoice, and Ignition credits the balance for you.
Retainer funding is currently available to US practices only, as an early access experiment in Ignition Labs. Practices outside the US keep the existing Retainer balance feature unchanged.
Please note: This is an early version, and some parts of the workflow need manual steps today. Please read the Recording retainer funding in your ledger and Current limitations sections below before you use this with clients.
Ignition does not hold your client's retainer money.
Funding payments are paid out to your practice's own bank account, the same as any other Ignition payment. The retainer balance in Ignition is a record of what your client has funded and used. It is not an escrow account or a trust account, and Ignition does not safeguard the money on your behalf.
Video overview
How retainer funding works
There are two halves to a retainer in Ignition.
Funding the retainer. You create a funding invoice from the client's retainer balance and collect payment. When the invoice is paid, Ignition credits the balance.
Using the retainer. You bill for completed work and choose Retainer billing as the payment method. Ignition deducts the invoice total from the client's available balance.
Retainer funding itself is not taxed. Tax is applied when you bill work against the balance, so a drawdown reduces the balance by the invoice total including tax.
Every funding payment and every drawdown is written to the client's retainer activity log, so you have a record of how the balance moved and who changed it.
Prerequisites
To use Retainer funding you need:
A practice based in the United States.
Ignition Payments set up, so you can collect the funding payment.
If your practice already had the Retainer balance Labs feature turned on, Retainer funding has been enabled for you automatically. Otherwise, go to Settings → Labs and turn on Retainer funding.
Turning it on also gives you access to the retainer balance on your client records and the Retainer billing payment option on one-time invoices.
Add money to a client's retainer
Open the client's record and go to the Summary tab.
Find the Retainer balance section and select Add to balance.
Enter the amount you want to collect.
Choose how you want to collect it, either by charging a payment method your client already has stored, or by sending your client a payment request.
Review and issue the funding invoice.
Your client receives and pays the funding invoice exactly like any other Ignition invoice.
What happens when the funding invoice is paid
Ignition credits the retainer balance only once the funding invoice is fully paid. Issuing the invoice does not change the balance, and a partly paid invoice does not credit part of the balance.
A few things worth knowing:
Bank payments take longer. ACH payments can take several business days to clear. The balance is credited when the payment reaches a paid state, not when your client submits it.
Payments you record yourself still count. If your client pays by check and you mark the funding invoice as paid, Ignition credits the balance the same way.
The balance is credited the full invoice amount. Processing fees are charged to your practice, so your payout is the amount less fees, but your client's retainer balance reflects the full amount they paid. For example, if your client funds $1,000, their balance goes up by $1,000 even though your bank receives slightly less.
Use the balance to pay an invoice
When you create a one-time invoice for work you have completed:
Add the services you are billing.
Choose Retainer billing as the payment method.
Review and issue the invoice.
Ignition deducts the invoice total from the client's retainer balance and records the deduction in their retainer activity log.
Two rules apply:
The balance has to cover the whole invoice. Retainer billing cannot be split with another payment method. If the balance is short, the Retainer billing option is unavailable until the client funds more.
Tax comes off the balance too. The deduction is the invoice total including tax. A $100 service with $10 tax reduces the balance by $110.
A retainer balance cannot be used to pay its own funding invoice, so a client's balance can never top itself up.
Retainer funding compared with a deposit
Retainer funding and Deposit billing both collect money upfront, but they solve different problems.
Retainer funding | Deposit billing |
Creates a balance on the client record that any future invoice can draw against. | Collects part of a known, fixed service price upfront and bills the rest later. |
Use it when the client is putting money aside for work that has not been scoped or priced yet. | Use it when you already know the price and want to split it into an upfront payment and a balance. |
Funded from the client record with a one-time invoice. | Set up in the proposal editor. |
Recording retainer funding in your ledger
Retainer funding is money your practice has received for work it has not yet delivered. Depending on your accounting treatment, it usually needs to be recorded as a liability or unearned revenue rather than as earned income.
Ignition does not currently complete this reclassification automatically in Xero or QuickBooks. If the funding invoice and payment appear in your connected ledger as ordinary sales income, you must manually adjust the ledger.
The appropriate accounts, tax treatment and journal entries depend on your jurisdiction, accounting basis and agreement with the client. Confirm the process with the person responsible for your practice's accounts.
Recommended reconciliation process
Your client's retainer activity log is your source of truth for what happened in Ignition. A workable process generally covers three stages.
1. When your client funds their retainer
After the top-up payment is received:
Locate the funding invoice and payment in your connected ledger.
Confirm the amount received and any processing fees.
Move or reclassify the relevant amount from sales or income to your chosen client-retainer liability or unearned-revenue account.
Keep payment processing fees separate from the client's gross retainer balance.
For example, if the client pays $1,000 and your practice receives a smaller payout after processing fees, the client's Ignition retainer balance is still credited by $1,000. The processing fee is an expense of the practice; it does not reduce the client's balance.
2. When the retainer is used
When you issue an invoice and pay it from the client's retainer:
Confirm the deduction in the client's retainer activity log.
Reduce the amount held in your retainer liability account by the same amount.
Recognize the service revenue and the tax for the work you invoiced.
Check that the funding and the drawdown have not caused the same revenue or tax to be recorded twice.
3. Reconcile the balance regularly at the end of each reporting period
Review each affected client's balance and Retainer activity in Ignition.
Compare the balances with the amount held in your ledger's retainer liability account.
Investigate funding payments, drawdowns, refunds or manual balance edits that do not match.
Record any required correcting entries.
Ignition does not currently provide a reconciliation report for this process.
Voids and refunds
Voiding a funding invoice
You can only void a funding invoice while it is still unpaid, and the balance is only credited once the invoice is paid. So voiding a funding invoice never changes your client's retainer balance, and there is nothing to correct afterwards.
Refunding a funding payment
Refunding a paid funding invoice does not automatically reduce your client's retainer balance. Ignition leaves the balance alone, because some or all of the funded amount may already have been used to pay other invoices, and reducing it automatically could push the balance negative.
If you refund a funding payment:
Open the client's retainer activity log and check how much of the funded amount is still unused.
Adjust the client's retainer balance manually where appropriate.
Record the refund in your accounting ledger.
Confirm the balance has not gone negative.
If your client has already used part of the funding, you may only need to adjust the unused portion, or handle the difference outside Ignition.
Refunds of unused retainer money come out of your practice's own funds, because the funding was paid out to you rather than held by Ignition.
Tax considerations
Retainer and advance-payment rules vary by jurisdiction. Depending on the arrangement, tax may become due when:
The funding invoice is issued.
The payment is received.
The balance is applied to future work.
Unused money is refunded or forfeited.
Ignition's current Labs experience does not determine the correct tax or revenue-recognition treatment for your practice. Retainer funding may also appear in Ignition reports as invoiced revenue even though your practice treats it as a liability.
Review funding activity before relying on Ignition revenue reports, tax reports or connected-ledger reports for financial reporting.
Reporting considerations
Reporting treatment for retainer funding is still being developed, so check funding activity before you rely on Ignition revenue or tax reports for financial reporting. Retainer funding may appear in revenue reporting even though your practice treats it as a liability.
The client's retainer activity log is the most reliable view of funding and drawdown activity while this is in early access.
Current limitations
This early access version:
Is available to US practices only.
Supports manual funding only. There is no automatic or minimum balance top-up yet.
Collects funding through one-time invoices, not through proposals. You cannot fund a retainer as part of a proposal acceptance.
Requires the retainer balance to cover a drawdown invoice in full. Retainer billing cannot be combined with another payment method on the same invoice.
Does not sync retainer funding to Xero, QuickBooks or any other connected ledger, and excludes it from exports.
Does not adjust the retainer balance automatically after a refund, void or payment reversal
May include retainer funding in revenue reporting.
Requires practices to confirm their own tax and accounting treatment.
FAQs
Does Ignition hold my client's retainer money?
No. Funding payments are paid out to your practice's bank account like any other Ignition payment. The retainer balance is a record of what has been funded and used, not an escrow or trust account.
Is the funding payment taxed?
No. Retainer funding is not taxed when your client funds their balance. Tax is applied when you bill work against the balance, and the drawdown reduces the balance by the invoice total including tax.
Can a client fund a retainer as part of accepting a proposal?
Not yet. Funding happens from the client's retainer balance on their client record, using a one-time invoice.
Can I set up automatic top-ups when a balance runs low?
Not yet. Every top-up is initiated by you. Automatic and threshold-based top-ups are a possible future improvement, and the feedback link on the Labs tile is the best place to tell the team you want it.
What happens if a client's balance does not cover an invoice?
The Retainer billing option is unavailable on that invoice until the balance covers the full total, including tax. Fund more to the balance, or collect that invoice using another payment method.
Can I still edit the retainer balance by hand?
Yes. The balance remains editable on the client record, and every change is recorded in the retainer activity log.
Why does my payout not match the amount funded?
Payment processing fees are charged to your practice, so your payout is the funded amount less fees. Your client's retainer balance is credited the full amount they paid.
Need help?
For help using Retainer funding, or to share what is and is not working, reach out to our Support team through bottom right hand widget or via help@ignitionapp.com. Feedback on early access features shapes what gets built next.
For advice on liability accounts, revenue recognition, sales tax or the treatment of client funds, speak with the person responsible for your practice's accounting and compliance.