What Are Retainers in FreshBooks?
Retainers function as pre-paid agreements where clients pay a fixed amount upfront to secure your services for a specific period. This arrangement benefits both parties by creating financial predictability and setting clear boundaries around the work to be completed.
FreshBooks has designed their retainer feature specifically for service-based professionals who want to simplify their billing processes. When you create a retainer, the system automatically generates invoices according to your predetermined schedule. Each time you log work for that client, FreshBooks deducts those hours from the retainer balance without requiring manual intervention.
The beauty of this system lies in its flexibility. Should you exceed the allotted retainer hours, FreshBooks allows you to invoice those excess hours separately, often at a different rate. This automation helps prevent scope creep while ensuring you're fairly compensated for all your work.
Why Use Retainers For Your Business?
Retainers transform how service-based businesses operate by providing numerous advantages that impact both your financial stability and client relationships. The predictable cash flow they generate allows for better business planning and reduces stress around meeting monthly expenses.
Administrative workload decreases significantly when you implement retainers through FreshBooks. The platform automates invoice generation, payment reminders, and time tracking against retainer balances. This automation frees up valuable hours that you can redirect toward billable work or business development activities.
Client relationships often improve under retainer arrangements because expectations become clearer from the start. Both parties understand exactly what services are covered, how many hours are included, and what happens if additional work is needed. This transparency reduces misunderstandings and builds trust over time.
Project forecasting becomes more accurate when you know exactly how much of your time is already committed through retainers. You can make better decisions about taking on new clients or projects because you have a clear picture of your available capacity. This prevents overcommitment and helps maintain quality across all your work.
Step-by-Step Retainer Setup Guide
Setting up retainers in FreshBooks requires following several key steps to ensure proper configuration. This process helps establish the foundation for automated billing and time tracking that will save you countless hours of administrative work in the future.
The following walkthrough covers everything from accessing the retainer feature to tracking time against your newly created retainer. Each step includes specific details to help you navigate the process smoothly, even if you're new to FreshBooks.
Access Your Account
Begin your retainer setup by logging into your FreshBooks account with your username and password. Navigate to the dashboard where you'll find all the main features of the platform displayed for easy access.
Remember that retainers are only available on Plus and Premium plans within FreshBooks. If you're using a lower-tier plan, you'll need to upgrade before accessing this feature. The investment typically pays for itself through time savings and improved cash flow management.
Find the Retainers Section
Navigate to the "Invoices" tab located in the main menu of your FreshBooks dashboard. This section contains all your billing-related features and options for managing different types of invoices and payments.
Look for the "Retainers" subsection within the Invoices area. This dedicated space allows you to manage all your retainer agreements in one convenient location. The interface displays your existing retainers and provides options for creating new ones.
Create a New Retainer
Locate and click the "New Retainer" button, typically highlighted in green for visibility. This action opens the retainer creation form where you'll input all the necessary details for your agreement.
The button might alternatively be labeled "Create Retainer" depending on your FreshBooks version. Either way, clicking this option initiates the setup process for establishing a new retainer relationship with one of your clients.
Configure Essential Details
Select the client for whom you're creating the retainer from your existing client list. FreshBooks only allows one active retainer per client at any given time, so choose carefully if you provide multiple services to the same client.
Specify the retainer amount that represents the fixed sum your client will pay upfront. This figure might be based on an hourly rate multiplied by a set number of hours, or it could be a flat fee for a package of services. Consider your typical workload for this client when determining an appropriate amount.
Define the retainer period that establishes how long the agreement will remain active. Common options include monthly, quarterly, or custom timeframes based on project needs. The period you select will determine how often new invoices are generated and when the retainer balance resets.
Set Up Invoicing Schedule
Configure how frequently FreshBooks should generate invoices for your retainer. Most businesses opt for monthly billing cycles, but you can customize this based on your specific needs and client preferences.
Review the invoice template and payment options to ensure they match your business standards. FreshBooks allows you to preview the invoice your client will receive, giving you the opportunity to make adjustments before finalizing the setup.
Add any special notes or terms that should appear on each invoice. This might include information about how unused hours are handled or details about the services covered under the retainer agreement.
Activate Your Retainer
Review all the information you've entered to verify its accuracy before proceeding. Double-check the retainer amount, period, and invoicing schedule to ensure everything aligns with your agreement.
Click the "Save" or "Set and Continue" button to activate your retainer. Once activated, FreshBooks will begin automatically generating invoices according to your specified schedule and tracking time against the retainer balance.
Track Time Against Retainers
FreshBooks offers two primary methods for tracking time against your retainer:
- Project association: Link specific projects to your retainer so that all time entries for those projects automatically deduct from the retainer balance.
- Individual time entries: Manually assign time entries to a retainer, which works well for contractors or professionals who handle various small tasks for the same client.
Monitor your retainer balance regularly through the FreshBooks dashboard. This helps you stay aware of how much time remains in the current period and allows you to notify clients proactively if they're approaching their limit.
Managing Retainers Effectively
Successful retainer management extends beyond the initial setup process. Implementing certain practices ensures your retainer arrangements remain beneficial for both your business and your clients over the long term.
Regular monitoring forms the foundation of effective retainer management. Check your retainer balances frequently to understand usage patterns and anticipate when clients might need to renew or adjust their agreements. FreshBooks provides clear visualizations of remaining hours or budget that make this process straightforward.
Communication with clients about retainer status prevents misunderstandings and builds trust. When a client approaches their retainer limit, send a friendly notification so they can decide whether to approve additional work or adjust their priorities. This proactive approach demonstrates professionalism and helps maintain positive relationships.
Retainers vs Recurring Templates
Understanding the differences between retainers and recurring templates helps you choose the right billing method for your specific business needs. Both options offer automation benefits, but they serve distinct purposes within the FreshBooks ecosystem.
Recurring templates work best for businesses that provide the same products or services on a regular schedule. These templates simply reproduce the same invoice at predetermined intervals without tracking usage or deducting from a prepaid balance. They're ideal for subscription-based services or regular product deliveries that don't vary from month to month.
Retainers, by contrast, are specifically designed for service-based work where time or deliverables might fluctuate within agreed parameters. They include the crucial feature of tracking time against a prepaid balance, which helps both you and your client monitor usage. This tracking capability makes retainers particularly valuable for consultants, designers, writers, and other professionals whose work varies in scope.
The key distinction lies in how these options handle variable work. Recurring templates don't account for fluctuations in service delivery, while retainers automatically track usage against the prepaid amount. Choose retainers when you need to monitor time spent and maintain transparency about how client funds are being utilized.
Best Practices for Retainer Success
Implementing certain strategies can maximize the benefits of your retainer arrangements. These practices help ensure smooth operations, satisfied clients, and optimal financial outcomes for your business.
Forecasting your monthly income becomes much easier with retainers in place. Since you know exactly how much prepaid work you have scheduled, you can make more accurate predictions about your cash flow. This predictability allows for better business planning and reduces financial stress.
The following numbered practices will help you get the most from your retainer arrangements:
- Establish a formal written agreement that clearly outlines all terms and conditions of the retainer relationship, including scope of work, deliverables, payment schedule, and handling of excess hours.
- Review client usage patterns regularly to identify opportunities for adjusting retainer amounts, either increasing them for clients who consistently exceed their hours or decreasing them for those who rarely use their full allocation.
- Integrate your time tracking with project management tools within FreshBooks to ensure every billable minute is accurately captured and properly assigned to the correct retainer.
- Educate your team thoroughly about how retainers work, especially focusing on proper time logging procedures and the importance of assigning hours to the appropriate client retainer.
- Leverage FreshBooks' analytics and reporting features to evaluate the profitability of each retainer agreement and make data-driven decisions about pricing and resource allocation.
Handling Special Retainer Situations
Every retainer relationship eventually encounters scenarios that require special handling. Knowing how to address these situations professionally maintains client satisfaction and protects your business interests.
When clients exceed their retainer hours, FreshBooks makes it easy to bill for the additional time. The system allows you to generate one-time invoices for excess hours, often at a different rate than your standard retainer pricing. Always discuss this possibility with clients upfront so they understand the process and aren't surprised by additional charges.
Unused retainer time presents another common scenario that requires clear policies. Most businesses don't automatically roll over unused hours to the next period unless specifically stated in the agreement. Decide whether you'll offer refunds, partial credits, or simply consider unused time as forfeited, and communicate this policy clearly in your retainer agreement.
Real-World Retainer Examples
Seeing how retainers work in practice helps clarify their benefits and implementation. These examples illustrate how different professionals use FreshBooks retainers to improve their business operations.
Freelance web developers often establish monthly retainers covering a set number of hours for maintenance, updates, and small changes to client websites. For instance, a developer might create a $2,000 monthly retainer covering 20 hours of work. When urgent updates require additional time, those extra hours are billed separately at a premium rate. This arrangement provides stable income for the developer while giving the client priority access to services.
Marketing consultants frequently use retainers to provide ongoing strategic guidance and campaign management. Rather than tracking specific hours, these retainers might cover a package of services delivered each month. The consultant uses FreshBooks to track activities against the retainer and generate detailed reports showing exactly what the client received for their investment. This transparency builds trust and demonstrates the value provided.
Troubleshooting Common Challenges
Even with careful setup, you might encounter occasional issues with your retainers. Understanding how to address these challenges ensures smooth operation of your billing system.
Start date conflicts sometimes occur when trying to modify existing retainers. If you need to change a retainer's start date, ensure it doesn't overlap with periods where invoices have already been generated. FreshBooks prevents changes that would create conflicts with past transactions, so you may need to create a new retainer instead of modifying the existing one.
Assignment errors can happen when time entries aren't properly linked to the correct retainer. Regularly review your activity logs and retainer reports to catch any misaligned entries. Correcting these promptly prevents billing discrepancies and ensures accurate tracking of retainer usage.
Deletion concerns arise when a retainer no longer meets your needs. FreshBooks allows you to delete retainers, but this action affects historical data. The platform provides an "undelete" option if you change your mind, but it's generally better to let existing retainers expire naturally and create new ones with updated terms rather than deleting active agreements.
Creating Effective Retainer Agreements
Beyond the technical aspects of setting up retainers in FreshBooks, developing clear written agreements strengthens your client relationships. These documents establish expectations and prevent misunderstandings about the services provided.
A comprehensive retainer agreement should include detailed descriptions of the services covered. Specify exactly what work falls within the retainer scope and what would require additional billing. This clarity helps prevent scope creep and ensures both parties share the same understanding of what's included.
Payment terms deserve special attention in your agreement. Address whether payments are refundable, if unused time carries over, and when payments are due. Many businesses require retainer payments before the period begins, ensuring you have funds in hand before delivering services.
Transform Your Business With Retainers
Implementing retainers through FreshBooks can revolutionize how you manage your service-based business. The predictable income, reduced administrative burden, and clearer client expectations create a more sustainable and enjoyable business model.
Start by identifying which clients would benefit most from a retainer arrangement. Look for ongoing relationships where work occurs regularly and predictably. These situations provide the perfect opportunity to propose a retainer that benefits both parties through increased efficiency and clearer expectations.
Remember that successful retainers depend on delivering consistent value to your clients. Use the automation FreshBooks provides to free up time for focusing on quality work rather than administrative tasks. When clients see the value they receive from their retainer investment, renewals become almost automatic, creating the stable income base every service business needs.
