Third-Party Payment

I use accounts receivable to have my customers pre-pay for future services. Now, I have a third party who wants to cover the expenses incurred by those primary customers’ projects. This third party would like me to invoice them every month for the services provided to these select customers.

What is the easiest way for me to do that? I would normally create an invoice for the customer’s project and their pre-paid account would pay for it. Now I need to track those expenses so the customer can still receive an unbilled invoice for the services, but bill the third party.

I think this is more a basic accounting question for your accountant than about Manager.

Your reasons for wishing to do this are not clear. And neither is the situation.

First, why do the end users (recipients of your services) need to see any invoice if you do not expect them to pay? Sales invoices go to customers, not beneficiaries of what sound like charitable services. If there is a valid reason, please explain.

Second, projects will neatly account for the separate end users on a monthly sales invoice sent to this mysterious benefactor. This could be done individually by project or with line custom fields on a combined invoice. Notably, if the benefactor is the entity you expect to pay for the services, the benefactor is your customer.

All that said, if there is some reason the end users must be shown as customers within your records, you can still receive money against their receivables from a third party. Simply list the third party as Other on the receipt, post the receipt to Accounts receivable and select the appropriate end user on each line of the receipt. If you are treating the end users as the customers, you cannot send a sales invoice to the third party for the same services. But nothing stops you from sending information copies of the end-user customers’ sales invoices to the third party to let them know how much to pay.

Yes Tut, you are correct. The end user will not need to see the invoice. As long as they are receiving the product from my services, they should be satisfied. I simply thought it would be a good way to track the project, what was done, and the date of the service as a record between me and the service recipient.

I will consider the options you provided for the accounts receivables. Understand that some of these end users have historically been paying their own way. Now, however, there is a non-profit that wants to cover their expenses. Thus, crediting the customer’s account but having the non-profit as the “other” payee might work best. Or, instead of working from a “pre-pay” structure, I can do the work and collate the unpaid invoices at the end of the month and provide them to the non-profit for payment. I can always have a custom field on the invoice that designates to the end user that no payment is necessary due to the anticipated largesse from the non-profit in paying the invoice.

I am not an accountant, but a small home business owner (SMLLC). I appreciate your assistance in working out the most efficient way to solve this new aspect of my operation. Thank you!

Apologies, Mark. I manage my home business and handle accounting as a Single-Member Limited Liability Company (SMLLC). Manager has been invaluable for my bookkeeping learning curve, and the community support has been fantastic, especially for someone like me without formal training. I thank you for your suggestion, but learning Manager’s tools inherently involves grasping basic accounting principles. That’s why it attracts users with different levels of experience. It’s user-friendly for all, but some of us beginners require assistance with the fundamentals.

You are on the right track. But by sending the recipient of the services a sales invoice as a customer, you are not crediting their subaccount in Accounts receivable, you are debiting it. (Don’t worry; most novices get debits and credits reversed.) And the non-profit benefactor is not the payee; they are a payer. That confused so many people the developer changed the field label to “Paid by.”

Batch View would be perfect for this.

Use a footer for this rather than a custom field. The language will rarely change, and you can add your note by checking the box and selecting from the menu. A custom field either has to be filled in each time or set semi-permanently in Form Defaults. Assuming you have other customers who are not covered by the benefactor, a footer would be more convenient. It is pre-existing text that is added only when needed.

Great advice!

I was looking over the “Receipt” form. Since I can line item each customer (recipient of the service) and have the benefactor as an “Other” payer (could I make the non-profit another Customer who the Receipt denotes as the Payer, but the Accounts Receivable line items still credit other Customers? I know this concept might be rather unusual), wouldn’t this allow me to credit their subaccount as you suggested via Accounts Receivable? Thus, the benefactor might send me one monthly deposit for the total unpaid invoices, but I could distribute it to the appropriate customers to pay their unique invoice totals.

This way I wouldn’t need to invoice the benefactor for projects performed for others. I could maintain my current setup, but accommodate a different payer for those projects. Am I still on the right track? It also means I don’t need to use a footer because the recipient of services would still be uniquely invoiced for those services.

One other challenge I need help with…if a current customer has funds (Accounts Receivable) in their account, but this new benefactor will be taking care of paying for future invoices, how do I create an invoice that is NOT automatically paid for from their account? I don’t see an option box on the Invoice form for something like this. The point is, I’d like to leave their funds in their account in case they lose the support of this benefactor in the future, but create unpaid invoices to be submitted monthly to the benefactor for payment. Then, I can use the itemized Receipt (as mentioned above) to credit the distinct Invoice #s for those customers. I hope I am explaining this enough. I assume that it will work out that their private funds will be “renewed” in their account every month once the benefactor makes payment. The problem is, if someone has $10 in their account, and has services rendered that incur a $20 charge, then the invoice will use their personal $10 and the outstanding invoice paid by the benefactor will only show as the other $10 when it should be the full $20 (leaving the customer’s private $10 intact).

Taking into account my other reply, if I begin using the non-profit as the “Customer”, is there a way for a Custom Field to be a dropbox that can access my current Customer list? If I start invoicing the non-profit for particular, regional customers, I’d rather not have to type their name and project description on every invoice. I’d have to have some way to designate each project. It can be done using the “Description” but is tedious to write, for example, “John Doe - Service Request Received on xx/xx/xxxx” for every Invoice.

I’m trying to decide if it is easier to pivot to your suggestion for having the non-profit as the customer or if it is better to have the recipients as customers who have the non-profit as the payer via Receipt. I know the non-profit wants to have a record (obviously) of each project and the recipient. I also want to have the service recipient receive a record of their project. In addition, I use a two-window business envelope, and the Invoice is properly formatted to have the correct addresses displayed. With the non-profit as the customer, how would I produce a document that substitutes the service recipient’s address in the addressee section of the envelope? And, yes, I’m using an older version of Manager because I don’t understand how to do that now that Custom Templates have been removed from the new versions of Manager. I tried an updated version soon after that feature was removed, but couldn’t afford the delay caused by not having my Invoices and Quotes correctly formatted for my envelopes!

No. Once a customer is chosen in the Paid by field, the customer subaccount of Accounts receivable cannot be changed.

You can still do that. And the Fixed total checkbox will help, by making sure the total of all the individual lines equals the amount received.

Let me be clear. You cannot do this, because you would be debiting Accounts receivable twice for each service, with no way to clear the receivables. This would distort both your balance sheet and profit and loss statement.

No, for reason explained above.

I don’t follow your thinking here. If you send a sales invoice to someone you don’t expect to pay up because of an outside benefactor, you need to inform them of that fact.

The only way to do that is by setting up special accounts. There is a Guide that covers this situation. But it would mean quite a bit of work for limited benefit. And what would be your purpose for holding onto the end-users’ funds? In effect, you are holding those monies in escrow, so you could not use them. It would be cleaner to refund their money until the situation changes in the future.


That’s life in the accounting department. Chalk this up to the overhead you must expend to get the business. After all, there is a good chance you would not gain the business if the end users were not aware the benefactor will be paying for it. We often jump through accounting hoops in order to get paid. (I have had customers who demanded submittal of invoices through an online portal. Of course, that meant I had to complete a sales invoice twice: once for my accounting records and once for theirs. It was a small burden to shoulder for a lucrative stream of business.)

To be clear, I never suggested or recommended this approach. I merely explained options. Personally, I would favor the approach of treating service recipients as customers, forwarding a non-Manager summary of monthly charges (and possibly copies of end-user sales invoices) to the benefactor each month. Treat the benefactor as an Other. This has the advantage that, if the benefactor ever quits the deal, you don’t need to change procedures. You will just receive money directly from the end users as before.

This concern is too far down in the weeds. Resolve your accounting flow first. Honestly, if you have to mail documents in a standard envelope, is that such a big deal? Of course, if you follow my actual recommendation, it won’t be an issue at all.

That is not true. They have been moved under Obsolete Features, but still function. (And they are themes, not templates.

Again, you are worried about the shortest pole in the tent. If you are really worried about delay, why aren’t you emailing these documents?

1 Like

Delving into this from the basic accounting side (not software side), maybe my business set up will help you.

My customer is a builder. I provide services for each of their customers. They have a customer name, job number and address. My bill never goes to the customer- just the builder.

I have custom fields set up on both my sales orders and sales invoices, as well as line items. My sales invoices also have a custom date field per line item for completion date.

Builder notifies me that Customer A, Job#123 is ready for my services (and lists which services I will be providing).

I then create a sales order for the builder (this helps me track what needs to be done, as well as what I need to invoice when ready). I note per line item the job name and job number. (I do not need to reference the address, as it is not necessary). I also note the job number and name at the bottom of the sales order entry screen.

When I have completed the job, I copy the sales order to a sales invoice. This transfers all line items, job name number etc. I delete any line items that are not completed (some items are further out in their timeline for completion). I add completion date to each line item. Due to using the “copy to” feature, the sales invoice is pre-populated with the job name and customer name at the bottom of the screen and set to print at the top of the invoice.

Maybe this will help you figure out how to make it happen, or get your thought process more on track?
For example, if you don’t deal with Job numbers (or PO numbers) you could call it “Request Number” or “Request Date”.

Another option would be to change the customer BILLING address as follows:

RE: Customer ABC

Use “Delivery Address” to store the customer’s actual billing address (if not already being utilized) If your customer already had separate billing & delivery addresses, screenshot the customer screen with all details intact, then upload the image to the customer file (Via “New Attachment”) before replacing the billing information with that of the non-profit.

This allows you to keep the customers past and present data intact, regardless of whether or not the non-profit continues to be a benefactor.

Hope this helps.

In support of @Tut’s suggestion and to break it down a bit more with one major alteration:

  1. Issue Sales Order to each each customer. with the usual details.
  2. Issue a Sales Invoice to the “Donor” as also a Customer with the total amount based on the issued Sales Orders (you have to do that outside Manager). You can consider to create and print-to-PDF a batch view of these Sales Orders and sent these as attachment to the Donor as evidence .
  3. Just record the Receipt of the Donor Invoice when you received the funds.

When the Donor stops paying you can revert to issuing Sales Orders to the Donor. The difference is that the Sales Orders do not change revenue only the Sales Invoice to the Donor which obviously still will need a Receipt to complete the financial transaction and clear the accounts receivable.

To me, @eko, your alteration is a complete reversal of my recommendation to the other option I mentioned. But now you would have extraneous sales orders in the system you never intend to fulfill in the sense of invoicing the recipient for the services.

I agree. This seems to be the easiest, most direct way to adapt what I am already doing into a new procedure that allows for the non-profit benefactor. By keeping the service recipients as the “Customer”, everything stays the same. As you said, these customers can be notified that the benefactor will be taking over their debts and deposits will not be required moving forward. I can provide them with the option to either use up their remaining funds before the benefactor would take over, or offer a refund for their current account balance before the benefactor becomes involved. It would then create unpaid invoices for future projects.

Now, sorry for being a novice to accounting and Manager, but, you said,

So, if the benefactor sends me a single payment to cover certain unpaid invoices, I list it as “Paid by” an Other and note the non-profit in the neighboring field. This would still allow me to line item each customer/invoice that needs to be paid by this single Receipt (Since trying to have the non-profit as a Customer would not allow for the proposed subaccounts in Accounts Receivable). Am I correct? And, of course, per your suggestion, those particular invoices will have a footnote that notifies the service recipient (in this example also considered the Customer) that this invoice will be paid for by X non-profit and no funds need to be remitted.

If what I am envisioning is true, then your replies have provided the solution to my situation and I will designate them as such once I receive your confirmation that my thinking on this is correct. Thank you.

That is true but it depends on the situation. Maybe I should have emphasised (will do so) that “…The difference is that the Sales Orders do not change revenue…” implying that only the Donor is involved as Customer in generating Income for the business. This is a simplification with a view to reduce errors that possibly could incur when adding each account receivable of the original customer to the Sales Invoice of the Donor.

@InfoHunter, everything you summarized in post #13 is technically correct, but it raises one question. You wrote:

That statement is true only if you truly mean to offer the option for the recipient customers to use up their credits before allowing the benefactor to take over responsibility. Why would they do that if they know they can have their invoices covered?

The way Manager works, if they choose to leave their former advance deposits with you, the program will automatically allocate any pre-existing customer credit to the next invoice, and keep doing that until all credits are used up. Depending on the size of their advance deposits, it could take several invoices until one has an actual balance due.

Theoretically, you could still send the billing information to the benefactor, including the zero-balance-due sales invoice(s). The benefactor could pay, and you could post the payment to the customers’ subaccounts in Accounts receivable, thus restoring the service recipients’ credit. But that seems very confusing to all and complex for you.

Holding on to the recipient customers’ money for an unknown period of time has the potential to expose you to accusations of misfeasance. You cannot use their money. So why not just send it back? Your workflow from then onwards will be much more straightforward. And if the benefactor ceases its beneficence in the future, you can revert to your former advance-deposit approach.

And that takes us back to my earlier point. You should offer the option only if you actually want to let the recipients waste their opportunity to take advantage of the benefactor’s kindness.

Yep. It would be tiresome to continually renew the funds to their account. I agree that refunding their account balance before the new relationship with the benefactor will be the easiest. It zeros out everything and the new phase of our relationship can be cleanly begun.

Ultimately, it may be a moot point. This non-profit will only be covering the expense for individuals in a particular geographical area and only if the clients will be pursuing other services with the non-profit. That will greatly limit which of my current customers will qualify. I foresee that most of those involved with this arrangement will be completely new clients to the non-profit and my company.

Thank you for all the information, Tut. I have been dropping in over the last few years and you are always most accomodating for patience and explanations. I sometimes think you should go by “Sphinx”, instead, because you know so much about accounting in general and Manager in particular.
Be well. Until next time…

Well, sorry to bother you right away Tut, but I have installed the latest version of Manager. I was using a version from 2022 because I was used to it and it worked for me. However, the theme I use has reoriented where my business logo is situated. I am not a programmer, had it right where I wanted it in the old version, and now it is incorrect. I used to have it in the top right corner of my invoice, but now it has moved to the center and is placed directly to the right of the “Paid in Full” box. Just as I feared about moving to a new version.

In addition, I created a footer for Invoice. I added two lines of a message. However, when I create a new invoice and select the footer, it does not show on the screen or in the “Print” preview. What’s up with that? The guide doesn’t really explain anything. It says create one and it shows up. The format of the Footnote screen makes me think it expects some type of coding to create the footer. The guide, however, doesn’t mention such a requirement.

Please do not continue a topic with new issues. Start a new topic. Those are the forum rules. And do not expect anything you have written in this thread to carry over.

I have discovered that creating a custom field with the “dropbox” option is just as convenient. I can have one or more standard messages and selecting any of them allows this section to show up on my invoices. Checkbox or message, either way, it is easy to make this section only visible to select customers.