Prepayments are collected in advance from customers when they purchase Drip Torches in order to help cover the cost of materials for production. This prepayment is applied to the customer's account as a credit and applied to the final invoice upon shipment of goods.
CREATE PREPAYMENT INVOICE
Orders containing Drip Torches (other than web orders, which pay the entire amount in advance) require a 50% prepayment. We create an invoice for our customers to pay from, which applies to the Customer Deposits liability account. This is unearned revenue until the product is actually shipped and deposits are applied to the final invoice.
- Create an Invoice for the customer.
- Select the sales order attributed to the prepayment being collected.
- When prompted to create the invoice based on the sales order, select the "Create invoice for selected items" option and uncheck the "Select All" box at the bottom so that you create a blank invoice.
- Change the Template to "KCR Prepayment Invoice".
- Set the Payment Terms to "Due on Receipt", which should automatically adjust the Due Date field to today's date.
EXAMPLE: If a customer ordered 8x #100-00 for $91.00 each and 8x #100-00RED for $97.50 each, the total cost of the Drip Torches is $1,508, so you would require $754 up front (50% of the total cost).
PRINT & EMAIL INVOICE
Once you have created the Prepayment Invoice:
- Print a copy and give it to Accounts Receivable. Accounts Receivable will attach the credit card receipt to the Prepayment Invoice and file it with the customer's file.
- Email the Prepayment Invoice to the customer's Accounts Payable email address, which should be the default. You do not need to copy any other email addresses, unless the buyer requests to be copied as well. Set the Email Template to "KCR Prepayment".
When a customer pays a Prepayment Invoice by credit card or check:
- Go to Receive Payments and enter the customer's name.
- Manually enter the Payment Amount and the Date that payment was received.
- Check the Prepayment Invoice and ensure that the full Payment Amount is applied to it in the Payment column.
- Save the payment.
CREATE CREDIT MEMO
Now that you have received payment from the customer, their Accounts Payable is $0 and the Customer Deposits account is the amount received. We now need to transfer the funds from the Customer Deposits account to the customer's Accounts Receivable to show as a credit on their account.
- Create a Credit Memo and enter the customer's name.
- Change the Template to "KCR Prepayment".
- Enter "Prepayment" in the Prepayment Item field and the deposit amount in the Amount field.
- Save the credit memo.
You do not need to print or email the credit memo. This transaction simply transfers the prepayment balance from one account to another.
When we ship the Drip Torches that the customer has prepaid, you will need to apply the appropriate credits to the final invoice so that you don't double-charge the customer.
After saving the final product invoice, click the "Apply Credits" button. Enter the total amount of credits you need to apply to the invoice. This total should equal 50% of the total cost of shipped Drip Torches.
EXAMPLE: If you are shipping 8x #100-00 but are leaving the 8x #100-00RED on backorder, you will apply only $364 of the $754 credit (8 x $91.00). The remaining $390 credit will be applied when the backordered Drip Torches are shipped.