How to Handle Pre-Payments
This Technical Note gives you some options as to handling pre-payments. Each company will have different requirements and should decide on a standard procedure to handle them.
You are familiar with entering in Orders, Invoices and Payments.
You are familiar with creating QuickReports.
Option 1 - Recording the Pre-payment
Probably the most common way of recording a pre-payment is directly through the "Order" record.
1. Enter in the Order as you normally would. If a partial or full payment is made on the Order, use the "Payment" button to add the payment.
The payment is recorded with the Order number. It does not contain an Invoice number, as an Invoice has not been created yet. At this time the payment is a credit and not applied to the balance due. Payments available to be applied will show as a dollar amount in the payments window of the order. This payment is to be applied at the time of Invoicing.
Option 2 - Recording the Pre-payment
Perhaps a payment is made by a Customer but it is not connected to a particular Order. In this case enter the payment as described below.
1. From the Inv menu > Apply Payments....
The payment screen opens.
2. Enter the Customer's company name and click the "Add Pay" button. Enter in the payment. The payment is not connected to an Order or Invoice at this time and shows as a credit due to the Customer. This payment can be attatched to an future Order or past Invoice at any time.
3. Click "OK" to return to the main payment screen. The payment is displayed in the "Payments" area and a credit is available in the "Diff" field
Option 1 - Applying Payments to an Invoice
When the Order is filled, an Invoice is created. An Order can be shipped in multiple shipment, creating multiple Invoices, therefore the payment does not automatically connect itself to an Invoice.
This next option explains how to handle applying the pre-payment to the Invoice.
1. Create the Invoice from the Order as usual. In the lower left hand side of the "Invoice" record you will see the "Payment" area displaying the payment.
2. Click on the "Appl" (Apply) button, to apply the payment to this Invoice. A window wil appear and ask you to confirm that you wnat to apply available payments to this Invoice click “OK” and the UnPaid dollar amount will then reflect the payment.
Option 2 - Applying Payments to an Invoice
The second option allows you to apply payments to one or a group of Invoices. This is done with the Output screen of the Invoices open.
1. Find the selection of Invoices to which you want to apply payments.
2. Click on the "Apply Pay" button on the lower portion of the Output screen. A warning screen opens for confirmation of the action. Click "OK".
Note: If the screen does not redraw itself, the "Bal Due" column does not update. Use the scroll bar to move the screen and you will see the correct balance due.
Option 3 - Applying Payments to an Invoice
When we put in the payment (option 2) directly in from "Add Payments...", we did not relate the payment to an Order, therefore it is not available to be automatically applied in the Invoice as in the last two examples. The following steps should be taken to apply the dollars to the correct Invoice (s).
1. Once again choose: Invs menu > Apply Pay... . Type in the Customer's company name. Any Invoices with a balance due and payments that have not been applied are displayed. For example the Customer has two Invoices and one payment.
2. Highlight the first Invoice to be paid. In the lower left hand area you will see the Unpaid amount of the Invoice reflected in the "Amount" field. Highlight the payment. You will see the Amt Avail reflected in the "Apply this Amt" field.
3. For this example, the apply amount is larger that the amount due. Since we only want to apply the amount of the Invoice, click on the equal sign that says "Set to unpaid Invoice amount". This will set the payment to pay off this Invoice and leave an available credit to pay off the next Invoice.
4. Click the "Green arrow" button to apply the payment to the Invoice. In many cases there is only one Invoice for the payment. In that case the process would e complete. In the example we still have an amount available from the payment.
5. Highlight the next Invoice to be paid. Highlight the remaining balance of the payment. Continue as above until you have used the entire credit or paid all of the Invoices.
Note: The payment reflects the last Invoice's information.
Note: This Option 3 procedure can be used instead of option 1 or 2, for Orders in which a payment was directly made. It must be used if the payment does not reflect an Order.
The Accounting Side of Things
At the end of a month (or accounting period) the Accounts Receivable (Asset) and Customer Deposits or pre-payments (Liability) should be reflected in the balance sheet. If a pre-payment has been made during the month and the Order has been Invoiced then there needs to be no adjustments.
The adjustment we need to be aware of are for payments that have been made and the product remains to be shipped(Invoiced). These payments have a "balance available" greater than zero.
A User Report can be set up to run at the end of the month to make a Journal entry. These are the steps to create the User Report.
Creating the Report
1. File menu > Print Quick Report.
Highlight Payments as the file and click the "All" button. Click "OK" to open the "Quick Report Editor".
2. The following are fields selected from the Payments file, used in the report:
Field Name Header Title
Date Received Date Rcvd
Amount Payment Amount
AmountAvailable Customer Deposit
OrderKey Order Number
CustomerKey Cust Acct Cd
3. Using the File Selection pull down menu, select the "Customer" file. From the "Customer" File add the "Customer" field to the report.
4. Format the numbers and designate the Sum and Count as desired.
5. Select: File menu > Page Setup... and give the report a name, date and page number.
6. Save the report, naming it "QR[Payments] Cust Deposit Rpt"
7. Click "OK" to leave the "Quick Report Editor", returning to the splash screen.
8. Admin Dept > Records menu > User Reports
9. An Output screen of all the "User Reports" opens. Choose: Actions menu > Add Record .
A new "User Report" record opens.
10. Click on the "Set Report Doc" and locate the "QuickReport" created above. Your path will not match the example but will be similar. Save the report by clicking "OK".
Running the Report
1. File menu > Print Defined Reports.... Select "Payments" as the File and click the "Search " button.
The "Search Editor" opens.
2. Create and initiate the Search "Amount Available" " greater than" "0".
3. You return to the "File Selection" dialog box, with the found payment records as the current selection.
4. Click "OK" and the "Defined Reports" window opens. Double Click on the "Customer Deposit Report" to send it to the printer.