---
title: "What is retainer?"
description: "Retainer explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/retainer/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is retainer?

Glossary

A retainer is an upfront payment a client makes to secure ongoing access to a business's services, often held as a credit against future invoices or as a guarantee the business will be available when needed.

Updated September 2026

## How retainer works

A retainer is typically collected before work begins and recorded as a liability, since the business has not yet earned it. As services are delivered, the value is drawn down against the retainer balance, similar to how deferred revenue is recognized over time.

Retainers are common with law firms, consultants, and agencies that want predictable, upfront cash flow and clients who want guaranteed availability. Once a retainer balance runs low, the business typically invoices the client to replenish it before continuing further work, keeping the arrangement funded and current.

## Example

A law firm collects a $5,000 retainer from a new client before starting work. Over the month, the firm logs $3,200 worth of billable hours against the retainer, leaving a $1,800 balance. At month end, the firm sends an invoice for $3,200 drawn from the retainer and asks the client to replenish it back to $5,000.

## Retainer in QuickBooks Online vs Xero

QuickBooks Online tracks retainers using a liability account, with funds moved to income as work is billed against the balance. Xero handles retainers the same way through a liability account and manual transfers, though some firms use a dedicated practice management tool alongside either platform for detailed time tracking against the retainer.

## Common mistakes

- A retainer payment gets recorded as revenue immediately when it is received, overstating income for the period before any of the related work has actually been done.
- Work is billed against a retainer without tracking the remaining balance, so the business keeps working for free once the retainer is fully used up.
- Nobody flags a low retainer balance in time, so the client relationship continues unfunded for weeks before anyone asks for it to be replenished.

## Why it matters

A retainer gives a business predictable upfront cash, but only if it is tracked correctly as a liability until the related work is actually delivered. Recording it as revenue too early overstates profit and can mislead an owner or lender about how much has genuinely been earned. For firms relying on retainers for steady cash flow, disciplined tracking keeps both the books and the client relationship on solid footing.

## Related terms

- [Deferred revenue](https://ledgerbpo.com/glossary/deferred-revenue/)
- [Progress billing](https://ledgerbpo.com/glossary/progress-billing/)
- [Invoice](https://ledgerbpo.com/glossary/invoice/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles retainer

We track retainer balances accurately, drawing down against them as work is billed and flagging when it is time to invoice for replenishment. A dedicated accountant keeps the retainer liability account reconciled to actual client activity. You get predictable cash flow without losing track of how much of each retainer has already been used.

[Invoices out on time, every time](https://ledgerbpo.com/services/invoicing-and-billing/)

Next step

## Books closed. Invoices paid. Every month.

Tell us what is going on with your books or billing. You will hear from a named person within 1 business day, with a custom quote and a plan for the first close.

- Reply from a named person within 1 business day
- No setup fee, month-to-month
- Your software, your data, no lock-in

Start with a custom quote

[Get a custom quote](https://ledgerbpo.com/get-a-quote/) [Book a 20-minute call](https://ledgerbpo.com/book-a-call/) Or call [+1-657-777-0006](tel:+16577770006) during US, UK or Australian business hours.

---

Source: https://ledgerbpo.com/glossary/retainer/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt