What’s the best way to handle overpayments by customers?
I have an ongoing client whom I invoice a fixed amount for billable time every couple of weeks and who pays me by an automated fixed recurring electronic payment. Several months ago, she overpaid an invoice. She decided that it’s easier to let me keep the money than to figure out how to recoup it.
But now every time I create a new invoice, there’s a carry-forward credit balance on her account, so none of the payments are applied entirely to the same invoice for which they’re meant.
How can I clear the books, so to speak, so the overpayment is accounted for properly and is absorbed into my income rather than sitting as a credit in the AR account?
First of all, you can’t treat an overpayment as income because this means you don’t intend to refund the excess received.
What you should be doing instead is reallocate the credit to another unpaid invoice. The easiest way to achieve this is to simply go to the excess receipt and remove the invoice # from the lines.
In case you don’t want to touch previously closed transactions, you can create a Zero-total receipt with one negative lines to undo previous allocation and as many positive lines with the new allocation.
I would disagree in the circumstances described, where the customer has indicated her desire to let @Jon keep the money. In that situation, it must be income. I have also experienced similar situations. On the receipt, I allocate the actual balance due to Accounts receivable and specify the invoice. Then I add a second line item, posted to Miscellaneous income for the overpayment. (You could also allocate to Tips or Bonuses or something similar).
