Advance Payments

Advance Payments

Advance payments are payments received from customers before goods are delivered or services are rendered. These payments are also known as prepayments or deposits. EquiBillBook allows you to record and manage advance payments effectively.

What are Advance Payments?

Advance payments are payments received in advance of completing a sale or providing services. They differ from regular payments because they are not yet linked to a specific invoice. Advance payments are typically used for:

• Securing orders before production or delivery
• Down payments for large purchases
• Retainers for ongoing services
• Pre-orders or advance bookings
• Security deposits

Recording an Advance Payment

Step 1: Navigate to Advance Payment

To record an advance payment:

1. Go to Customers → Customer Payment
2. Click "Advance Payment" or select "Advance Payment" as the payment type
3. Select the customer who is making the advance payment

Step 2: Enter Advance Payment Details

Fill in the advance payment information:

• Payment Date: Date when the advance payment was received
• Payment Amount: The advance payment amount received
• Payment Method: How the customer paid (Cash, Bank Transfer, Cheque, etc.)
• Account: Select the account where the payment is deposited
• Reference Number: Enter transaction reference, cheque number, or other identifier
• Notes: Add details about what the advance is for (order reference, project name, etc.)

Step 3: Save the Advance Payment

Once all details are entered:

1. Review the advance payment details
2. Click "Save" to record the advance payment
3. The advance payment will be added to the customer's account

Advance Payment Account

Advance payments are typically recorded in a liability account such as:

• Customer Advances or Unearned Revenue
• Deferred Income
• A dedicated advance payment account

This ensures proper accounting treatment until the advance is applied to an invoice.

Applying Advance Payments to Invoices

When you create an invoice for the customer:

Option 1: Apply During Invoice Creation

1. Create the sales invoice as usual
2. When entering payment details, select to apply advance payment
3. Select the advance payment(s) to apply
4. The system will automatically deduct the advance amount from the invoice total
5. Record any additional payment if needed

Option 2: Apply After Invoice Creation

1. Create the sales invoice first
2. Go to Customer Payments
3. Select "Apply Advance" or create a new payment
4. Select the invoice and choose to apply existing advance payment
5. The advance payment will be allocated to the invoice

Multiple Advance Payments

You can record multiple advance payments from the same customer:

• Each advance payment is tracked separately
• You can apply one or more advance payments to an invoice
• The system tracks available advance balance for each customer
• You can see all advance payments in the customer's payment history

Viewing Advance Payments

You can view advance payments through:

• Customer Payment List: Filter by "Advance Payment" type
• Customer Statement: See advance payments in customer statements
• Customer Details: View advance balance on customer account
• Reports: Generate reports showing advance payments and their status

Advance Payment Balance

The system maintains an advance payment balance for each customer:

• Shows total advance payments received
• Shows how much has been applied to invoices
• Shows remaining unapplied advance balance
• Updates automatically when advances are applied

Refunding Advance Payments

If you need to refund an advance payment:

1. Go to Customer Payments
2. Select "Refund" or "Customer Refund"
3. Select the customer and the advance payment to refund
4. Enter the refund amount and details
5. Process the refund transaction

See the Refund Processing article for detailed information.

Advance Payment Receipts

You can generate receipts for advance payments:

• Generate payment receipts showing the advance amount
• Receipts can include notes about what the advance is for
• Print or email receipts to customers
• Receipts serve as proof of payment until invoices are created

Accounting Treatment

Advance payments affect your accounting as follows:

• When Received: Increases your cash/bank account and creates a liability (unearned revenue)
• When Applied to Invoice: Reduces the liability and records the sale
• Accounts Receivable: Advance payments reduce the net receivables amount

Best Practices for Advance Payments

• Always record advance payments when received, not when invoices are created
• Add clear notes about what the advance is for (order number, project name, etc.)
• Set up reminders to create invoices and apply advances in a timely manner
• Regularly review unapplied advance balances
• Generate receipts for all advance payments
• Apply advances to invoices as soon as goods/services are delivered
• Keep proper documentation for audit purposes
• Track advance payment balances to ensure they're applied correctly

Common Scenarios

Scenario 1: Order with Down Payment

For orders requiring a down payment:

1. Record the down payment as an advance payment
2. Create the sales invoice when order is fulfilled
3. Apply the advance payment to the invoice
4. Collect the remaining balance

Scenario 2: Service Retainer

For ongoing services with retainer:

• Record retainer as advance payment
• Create invoices periodically for services rendered
• Apply retainer balance to invoices as services are delivered
• Replenish retainer when it runs low

Scenario 3: Pre-order or Booking

For pre-orders or advance bookings:

• Record booking/pre-order payment as advance
• Create invoice when order is ready or booking is confirmed
• Apply advance to final invoice
• Handle any refunds if order is cancelled

Related Articles

Learn more about:

• Recording Customer Payments
• Partial Payments
• Refund Processing
• Payment Receipt Generation

Advance payments are an important part of managing cash flow and customer relationships. EquiBillBook provides the tools you need to track, apply, and manage advance payments effectively while maintaining accurate accounting records.