What to do if a customer overpays or prepays?
There are times when a customer accidentally or intentionally overpays an invoice or prepayments are part of your business model. To account for these transactions, you can issue your customers a credit memo to document receipt of the payment and apply it to a future invoice.
This article reviews both how you should handle the overpaid and prepaid income received, and how you can apply the overpaids and prepaids as a credit.
Note that this is for handling overpaid / prepaid income (i.e. you charged a customer $1,500, and they sent $2,000, which is a $500 overpayment). If you are looking to track your own prepaid expenses, please reference our article on handling prepaid expenses in Ambrook.
Categorizing overpaid and prepaid income
You'll want to properly categorize the amount overpaid or prepaid, so it doesn't show up on your profit and loss as true income.
Creating a category for the overpaid/prepaid transactions
Before you’re able to tag overpayment and prepayment transactions, you’ll need to create either the “Overpayments” and/or the “Prepayments” in your Settings:
First, navigate to Settings, and select Categories
Type and select the “Overpayments” or the “Prepayments” category depending on your needs. This’ll prefill the “Parent Category” information.
Click “Save”, to save your new categories. In this example, the "CSA Prepayments" and "Overpayments" are going to be sub-categories to "Overpayments and Prepayments", which ii the parent category.
Tag the transactions
On the payment transactions in your ledger, you can now categorize them as “Prepayments” or “Overpayments”.
Applying overpaid or prepaid income as a credit
You can create a credit memo for the amount overpaid / prepaid, and apply it to a future invoice, so that your customer's next purchase is discounted by this credit.
Create a credit memo
Create a credit memo for the same amount for the customer
Apply the credit memo
Apply the credit memo to a future invoice by matching it as a payment after creating the invoice.