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This text refers to program version 8.1  

Prepayments and On Account Payments

Prepayments and On Account Payments allow you to issue payments to Suppliers without reference to specific Invoices (usually before you have received the Invoices). Prepayments are identified by Prepayment Numbers, while On Account Payments have no identifiers. Please refer here for details about Prepayments and here for details about On Account Payments.

A typical workflow when working with Prepayments and On Account Payments will be that you will issue a Purchase Order, for which you will pay a deposit. You will record the deposit as an On Account Payment or a Prepayment. When you receive an Invoice (for the deposit or for the Purchase Order as a whole), you will allocate the deposit to that Invoice, leaving any remaining amount on the Invoice as outstanding.

If you use On Account Payments, a single On Account balance will be maintained for each Supplier. When you issue a deposit, the balance will increase, and when you receive an Invoice, the balance will decrease. In reports, it is only possible to display a single On Account balance figure for each Supplier. Prepayments are identified by Prepayment Numbers, allowing separate balances to be maintained for each Prepayment. When you issue a deposit, you will create a new Prepayment, leaving the balances of any other Prepayments issued to the same Supplier untouched. This allows for the detailed monitoring of Prepayments. When you receive an Invoice, you will connect it to a particular Prepayment, again leaving the balances of other Prepayments untouched. Identification by Prepayment Number allows much greater detail to be shown in reports: for example, the Prepayment History P/L report will list every transaction affecting each Prepayment.

You must use Prepayments for deposits that you issue in foreign Currencies. The added precision given to a Prepayment by its identifying Prepayment Number means that it can be issued at a known exchange rate. When you allocate the Prepayment to an Invoice at a later date, the exchange rate might have changed and this can be accounted for. If you use an On Account Payment for this purpose, issuing a deposit will simply mean that the size of the Supplier's On Account balance will be increased. When you allocate the deposit to an Invoice, it will not be possible to establish the origin of the funds withdrawn from the On Account balance as On Account Payments have no identifiers. Therefore it will not be possible to account for exchange rate differences.

If you need to issue Prepayments and On Account Payments, you must first carry out the following configuration work:

  1. In the Contact records for each Supplier to whom you are likely to pay deposits, tick the On Account check box on the 'Terms' card.

  2. Specify a default control or suspense Account on the 'Creditors' card of the Account Usage P/L setting, using the On Account A/C field. The Account that you specify here will be debited with the value of each Prepayment and On Account Payment, and thus should usually be an Account that acknowledges that issuing a deposit creates an asset.

    You can also specify separate suspense Accounts in each Supplier Category or even in the Contact records for each Supplier ('Accounts' card) if you wish.

  3. If you need VAT to be posted from Prepayments and On Account Payments, select one of the Post Prepayment VAT options and/or the Post Payment VAT option respectively on the 'VAT' card in the Account Usage P/L setting.

    You should also specify the following Accounts—

    • I/P Accounts for each VAT Code in the VAT Codes setting (these Accounts will be debited with the VAT Value from each Prepayment and On Account Payment).

    • Prepayment VAT Account in the Account Usage P/L setting (this Account will be used from Prepayments if a particular VAT Code does not have an I/P Account. An On Account Payment requires an I/P Account).

    • On Account VAT Account in the Account Usage P/L setting (this Account will be credited with the VAT Value from each Prepayment and debited when you connect a Prepayment to a Purchase Invoice, providing you are not using the Prepayment amount excluding VAT option, also in the Account Usage P/L setting).

  4. If you want to make sure that you only use Prepayments (i.e. you want to prevent the use of On Account Payments), select the Use Prepayments, not On Account option on the 'Debtors' card of the Account Usage S/L setting. This option applies to both the Sales and Purchase Ledgers, and will mean it will be mandatory to enter either an Invoice Number or a Prepayment Number in every Payment row. This will be useful if you will issue deposits in foreign Currencies as previously mentioned, and may also be helpful if you need to post VAT from Prepayments.

    If you would like to ensure that every Prepayment has a unique number, select the Force Unique Prepayment Numbers option in the Account Usage P/L setting (in this case there are separate options for the Sales and Purchase Ledgers). This will mean that you will only be able to use a particular Prepayment Number in a single Payment row (with one exception: you will be able to use a Prepayment Number again if the Sent Value is negative i.e. if you need to cancel a Prepayment). If you are not using this option, you will be able to use the same Prepayment Number more than once, but only with the same Supplier and, if a Prepayment is in Currency, only with the same exchange rate.

Please follow the links below for more details about:
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The Payment register in Standard ERP:

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