Advance Payment Entry

 

Advance Payment Entry

Advance Payment Entry refers to when the Supplier or Customer pays beforehand, before making the invoice.

 

Generally, anAdvance Payment Entry is made in the case of high-value deals. Consider a Customer- Jane D’souza placing an order for a luxury furniture item costing ₹24,000. She is asked to give some Advance Payment Entry before the furniture house begins work on her order. She gives them ₹10,000 in cash.

 

In ERPNext, you can do this advance through a Advance Payment Entry. If there is a Sales Order, simply create a Payment Entry from there. If there is no Sales Order, you can always make a free-standing Payment Entry. The same principle is used for Suppliers via a Purchase Order.

 

Advance Payment Entry

1. What You Need First (Prerequisites)

Make sure these are prepared before you make an advance entry:

 

  • Customer or Supplier (referred to as “Party”)
  • Payment Account (such as Bank or Cash)

2. How to Make an Advance Payment Entry

  1. First, prepare and save a Purchase Order (for a supplier) or Sales Order (for a customer). This is required prior to making any advance payment.
    • For instance, you issued a Purchase Order of Rs. 50,000 and now wish to make Rs. 20,000 as advance.
  2. After saving the order, click Create and then select Payment Entry.
    • This will bring up a form where the system will fill details from your order automatically such as the supplier/customer name, total amount, etc.
  3. Next, check the payment information. Ensure the amount, bank or cash account, and party name are all entered correctly.
    • For example, if you’re paying Rs. 20,000 advance by bank, ensure the correct bank account is chosen under “Paid From” or “Paid To.”.
  4. Then click on Save, and then submit to confirm the payment.
    • Example: Now your advance of Rs. 20,000 is noted and will be adjusted later when the invoice is issued.

 

Note: If payment is not related to an invoice, ERPNext recognizes it as advance.

 

Example: When a Customer pays $5,000 as advance, $5,000 will reflect as credit in the Customer’s Receivable account.$5,000 will reflect as debit in the Company’s cash or bank account (This follows the double entry principle in accounting).

2.1 Advance in Invoice

When creating a Sales Invoice, you can verify whether the Customer has paid something in advance.

  1. When you’re issuing a Sales Invoice, you may want to verify if the customer has made a payment in advance already. This allows you to align the advance so the final invoice reflects the right balance.
  2. To do this, tap the Get Advance Received button (you will find it on the invoice form). This instructs the system to look for any advance payments from the same customer.
  3. ERPNext will now display all the advance payment entries for that customer.
  4. You will view the amount, date, and reference of the prior received payments.
  5. Choose the advance entry you want to apply from the list and input the amount you wish to apply.
    • Example: In case the customer has already paid Rs. 10,000 in advance, you can apply the entire amount or even less if necessary.
  6. Once it is applied, the due amount on the invoice will decrease.
    • Example: If the invoice amount is Rs. 50,000 and Rs. 10,000 is applied as advance, then the due amount remaining will now display as Rs. 40,000.
  7. Then, just click Save and then Submit the invoice to complete it.
  8. This invoice now reflects the advance correctly Adjusted, and your books will remain accurate.

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