DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Invoice for pre-payment


#1

I agreed with one of my customers that he makes a prepayment of 75%. Once I deliver the goods he’ll pay me the remaining 25%.

So I sent him an invoice with the full amount and put in the notes that he requires to pay 75% now and the rest on delivery. He got back to me that he’d prefer a new invoice which shows the 75% as total. A second invoice with the 25% should be send on delivery.

Is that the way to do?


#2

Then issue him two sales invoices instead of one.


#3

In addition to your accounting question, there may be legal issues to consider:

  1. Is your customer legally obligated to pay the full amount once agreeing to purchase your goods ? If so, a single invoice ( possibly with two line items) or two simultaneous invoices are appropriate.

  2. Can you sell the goods to someone else if the customer backs out of the deal? I see potential complications with only a 75% invoice that could in any way be interpreted as the total or final amount. This is especially worrisome if the goods are customized for the customer.

In all this, the size of the deal will matter. If writing off the 25% would be a minor problem, then perhaps you should do whatever makes the customer happy. But if you have a major investment by the time of delivery, you need more protection. You should consider why the customer wants a 75% invoice, because there is no valid accounting reason. If the customer has contracted for the goods, they will owe the money. You might well wonder whether they will have it when final payment comes due.


#4

Regarding:

  1. We have set up a contract months ago which says that my customer can buy more goods at a specific price and has to make the prepayment of 75%. So in that sense: yes.
  2. Yes, that was my worry! But based on 1 that should not be a problem.

Thanks heaps for pointing that out!!


#5

Thanks lubos. Tut expressed my concerns with his posting. But in fact, due to the valid contract I should not worry.

In the past I made my invoices via Word. And what I did under the item listing was (got it from an Example in the Internet):
SALE AMOUNT $1000
GST $100
TOTAL $1100
Prepayment % 75
On delivery payment % 25
TOTAL DUE (incl GST) $825

So I was wondering whether these additional lines “Prepayment” and “On delivery payment” could be configured for a Sale Invoice.

Anyway, all sorted.


#6

I created a separate liability account ‘Customer prepayments’ and a sales invoice item pointed to it. I use that to book the invoice for the prepayment.

I then do the final invoice with one line for the full amount and a second (negative) line undoing (reversing) the prepayment liability “Less pre-payment”.

Works fine. You cannot (currently) point a sales invoice item to the ‘Customre Credits’ account or use it as an account on an invoice. For me that is fine as these are specific pre-payments that I do not want auto-applied. I therfore consider "Customer Credits’ as the on-account credits aaccount and ‘Customer prepayments’ as the constact specific/not autoapplied prepayment accounts.


#7

That is really good. I’ll consider doing it the same way next time!

Thanks alasdair
Ralf