Need to be able to use customer credits on service invoices not retainer invoices

OK I have come across an issue that I can’t resolve.

I have a client who overpaid me for a service invoice which prompted the residual funds to land in the Customer Credits account, which I agree with.

After this, I collected cash funds for products I need to order for him, which I deposited into my cash account, and allocated to my ‘Customer Advance Payments - Purchases’ account. When I created the sales invoice for the products, Manager is automatically using the Customer Credit amount towards that invoice, which is really messing up the works for me.

I’d like to use the Customer Credits for additional Service invoices for this client and not for his Product purchases. How can I do this? I wish Manager didn’t automatically tap into the Customer Credits account for the very next invoice created for a given client. There should be an option to use the Customer Credits account within the Receive Money when you want to use it and not have it be automatic.

I consulted with an accountant on how to collect funds for product purchases and they said using an invoice allocated to the Customer Advance Payments - Purchases was the way to do it, and then receive the payments and allocate them to the same account.

So the way Manager is doing it automatically is messing up my actual income for service credits and allocating them to a product liability account. Help!

The way to do what you want is to use a journal entry to transfer the customer’s deposit from Customer Advance Payments-Purchases to Customer credits just before you create the sales invoice. Debit Customer Advance Payment-Purchases and credit Customer credits. Make the journal entry for the exact amount the invoice will be for. Manager will automatically apply the amount of new customer credits, but leave the existing balance when finished.

By the way, nothing you have mentioned has anything to do with a product liability account. The liability accounts involved are liabilities to customers.

For most businesses this would be a step which would be undesirable. Not to mention, one benefit of having this automatic is that when you import bank statements, you can set up bank rules to allocate payments from customers to Customer credits account and Manager will automatically find and use the credit against available invoices.

Why do you need to use an account Customer Advance Payments - Purchases account at all? Why not allocate the prepayment to Customer credits account and when creating an invoice for products, the credit will be automatically applied to it?

Or, you can maintain for this customer two accounts so he will be shown as two separate customers. One customer account would be used for service billing, other customer account for product billing. This way customer credits will not mix with one another.

I consulted again with my account consultant and here’s what we came up with. The end result is a valid and legal means of capturing what I need to accomplish in a clean way. It’s an extra step but WELL worth it for me to keep my records clean. I hope I’m explaining this well for you and possibly others who have this same issue with Manager automatically allocating Customer Credits to the first invoice created for a specific customer.

I now have two additional liability accounts to 1) capture the fund prepayment for product-only purchases: ‘Customer Advance Payments - Purchases’, and 2) to capture any overpayment by clients directly related to service-only tasks: ‘Customer Overage Payments - Services’.

The funds collected prior to product purchases are authorized by the client for products only and I cannot have monies collected for product purchases to be used for service payments since the product funds are a true liability.

Service funds are collected after the service has been performed. I have clients that will overpay me for service invoices if we have future projects we’re going to be working on. For example, a client owed me $200 and they paid me $500, so I legitimately have a Customer Credit of $300. This can only be used for future services rendered and not for product related invoices. And Manager doesn’t qualify the invoice type when its created so it was using service related funds to pay product related invoices, therein lies the problem.

With these two account types now I can completely control how and most importantly when these funds are applied and to what invoice(s). Once I’m ready to use these ‘credit’ funds, I do a Journal Entry to transfer the exact amount needed into the Manager created account Customer Credits so it can use those dedicated funds the minute I create the next invoice.

I’ve used it a few times now and it works perfectly and keeps my records clean and correct.

What you have done is exactly what I suggested, except that you have broken down the liability account into two categories to segregate products from service overpayments. That’s fine. Glad your accountant agreed with the approach. (I had little doubt.) Sounds like you’ve come to grips with most of the issues involved with your new business. Good luck.