Walkthrough: Set up and invoicing sales prepayments
This walkthrough takes you through the process of setting up and using prepayments in Business Central. Prepayments are payments that are invoiced and posted to a sales or purchase order before you post the final invoice. For example, you might require a deposit before you manufacture items to order, or you might require payment before you ship items to a customer. You can use the prepayments capabilities to invoice and collect deposits from customers, and to remit deposits to vendors. This way, all relevant payments are posted against the same invoice.
For each customer or vendor, you can define prepayment requirements for all items or selected items. When you've set up prepayments, you can then generate prepayment invoices from sales and purchase orders with prepayment amounts that are based on your setup. You can change the amounts on the invoice as needed.
For example, you can send more prepayment invoices if more items are added to the order.
About this walkthrough
This walkthrough will take you through the following scenarios:
- Setting up prepayments
- Creating an order that requires a prepayment
- Creating a prepayment invoice
- Correcting the prepayment requirements on an order
- Applying prepayments to an order
- Invoicing the final amount on an order with prepayment
Roles
This walkthrough includes tasks for the following roles:
- Accounting Manager (Phyllis)
- Order Processor (Susan)
- Accounts Receivable Administrator (Arnie)
Story
Phyllis is an accounting manager and makes decisions about which customers are required to pay a deposit before items are manufactured or shipped. Phyllis sets up Business Central to calculate prepayments automatically.
Susan is a sales order processor. When a customer calls to place an order, Susan enters the order into the system while the customer is on the telephone. This way, Susan can verify prices and payment terms with the customer immediately, and make changes to the order while negotiating with the customer.
Arnie works in the Accounts Receivable department and posts invoices and payments.
In this scenario, Phyllis sets up prepayment requirements for the customer Selangorian based on their credit history. Phyllis gives Susan instructions for how to handle their orders.
When the customer calls, Susan negotiates with the customer until they reach an agreement, and then chooses to calculate the prepayment in several different ways.
After Susan sends the prepayment invoice, the customer orders an extra item. Susan updates the order and creates a second prepayment invoice.
Arnie registers the customer's payment and applies it to the invoices, and then sends the final invoice.
Set up prepayments
Phyllis sets up the system to handle prepayments for customers.
- Phyllis decides to have the same number series for prepayments as the one used for sales invoicing.
- Phyllis sets application to check if prepayments are required before final invoicing on an order.
- Phyllis sets up default values for a required prepayment percentage for particular items and customers.
The following procedures describe how to complete Phyllis' tasks:
To set up number series for prepayments
- Choose the
icon, enter Sales & Receivables Setup, and then choose the related link. - On the Sales & Receivables Setup page, expand the Number Series FastTab.
- Verify that the number series for posted prepayment invoices in the Posted Prepmt. Inv. Nos. field is the same as for posted sales invoices (Posted Invoice Nos.), and the number series for posted prepayment credit memos (Posted Prepmt. Cr. Memo Nos.) is the same as for posted credit memos (Posted Credit Memo Nos.).
To block shipments for unpaid prepayment
- On the Sales & Receivables Setup page, on the General FastTab, select the Check Prepayment when Posting check box.
Now you can't ship or invoice an order that has an unpaid prepayment amount.
By default, Phyllis requires customer 20000 to be invoiced for a 30% down payment on all orders. Therefore, Phyllis will enter a default prepayment percentage on the customer card.
Phyllis requires all customers to be invoiced a 20% deposit for item 1896-S. Customer 20000 has a poor payment history, so Phyllis requires a 40% prepayment from customer 20000 for item 1896-S. The following procedure illustrates how to set up default prepayment percentages.
To assign default prepayment percentages to customers and items
Choose the
icon, enter Customers, and then choose the related link.Open the card for customer 20000 (Trey Research).
On the Payments FastTab, in the Prepayment % field, enter 30.
Choose the Related action, select the Sales menu item, and then choose the Prepayment Percentages menu item.
Fill in two lines on the Sales Prepayment Percentages page as follows.
Sales Type Sales Code Item No. Prepayment % Customer 20000 1896-S 40 Customer 20000 1900-S 30 Tip
Depending on your country/region, you must also specify a tax group code on the Costs & Posting FastTab for item 1896-S. When you use the demonstration company, this field is already set.
Close all pages.
To specify an account for sales prepayments in general posting setup
- Choose the icon, enter General Posting Setup, and then choose the related link.
- Select the line where the Gen. Bus. Posting Group field is set to DOMESTIC, and the Gen. Prod. Posting Group field is set to RETAIL.
- In the Sales Prepayments Account field, specify the relevant account. Your selection is automatically saved.
Tip
If you cannot see the field in the General Posting Setup page, then use the horizontal scroll bar at the bottom of the page to scroll to the right.
Create an order that requires a prepayment
In the following scenario, Susan, the order processor, creates an order when talking to a customer. The items the customer is ordering require a prepayment. Plus, the customer has made some late payments in the past. Susan's been instructed to require a fixed amount of 800 as a prepayment on the order.
The customer asks to pay 35%, to which Susan agrees and changes the order.
Susan creates the prepayment invoice and sends it to the customer.
To create a sales order with a prepayment
Choose the
icon, enter Sales Orders, and then choose the related link.Choose the New action.
In the Customer Name field, choose Trey Research.
Close the overdue balance warning that is displayed.
Fill in two sales lines with the following information.
Type No. Quantity Item 1896-S 1 Item 1900-S 1 By default, the prepayment fields on the sales line are hidden. To display the fields, you must personalize the page. For more information, see To start personalizing a page through the Personalizing banner.
Verify that the Prepayment % field on the line with item 1900-S contains 30. The default value was taken from the sales header, which was populated from the customer card.
The Prepayment % field on the line with item 1896-S contains 40. 40 is the percentage you entered on the Sales Prepayment Percentages page for item 1896-S and customer 20000.
For more information, see Set Up Prepayments.
In the Order action, choose Statistics.
On the Prepayment FastTab, the Prepayment Amount Excl. VAT field contains 458.16. If you create a prepayment invoice for the order now, 458.16 is the amount on the invoice.
In this scenario, Susan has been instructed to suggest a total prepayment of 800 for the order.
Important
Depending on your country/region, the following step might not apply.
Change the amount in the Prepmt. Amount Excl. Tax field to 800 and then close the page.
Verify the Prepayment % field on the sales lines, and you'll see that it has been recalculated to 67.02438 and 67.02282.
The recalculation includes all lines that have a prepayment percentage that is greater than 0.
Now the customer asks if the prepayment percent can be set to 35%. Susan's supervisor approves the change.
On the Sales Order page, on the Prepayment FastTab in the Prepayment % field, enter 35.
In the warning that appears, choose the Yes button. A rate of 35% will be applied as the payment percentage for the whole order.
Verify that the lines have been updated correctly.
Create a prepayment invoice
After entering the correct prepayment values on the order, Susan creates the prepayment invoice and sends it to the customer.
To create a prepayment invoice
- On the Sales Order page, choose Actions, then Posting, then Prepayment and then select Post and Print Prepmt. Invoice
- Choose the Yes button to post the invoice.
Note
Susan would now send the invoice to the customer.
Create an additional prepayment invoice
The following day, the customer calls Susan and makes changes to the order. The customer wants two of item 1896-S. Susan reopens the order, updates it, and then creates a second prepayment invoice for the order and sends it to the customer.
To create an additional prepayment invoice
On the Sales Order page, choose the Release action, and then Reopen.
On the line for item 1896-S, in the Quantity field, enter 2.
In the Order action, choose Statistics. The Prepayment Amount Excl. VAT field now contains 768.04, and the Prepmt. Amt. Invoiced Excl. VAT field contains 417.76. These values show that there's an extra prepayment amount that hasn't been invoiced yet.
To post an invoice for the extra prepayment amount, choose Actions, then Posting, then Prepayment and then select Post and Print Prepmt. Invoice
Choose the Yes button to post the invoice.
Apply the prepayments
The customer pays the prepayment amount. Arnie, from the accounting department, registers the payment, and applies it to the prepayment invoices.
To apply a payment to the prepayment invoices
Choose the
icon, enter Cash Receipt Journals, and then choose the related link.Fill in a journal line with the following information.
Field name Enter Document Type Payment Account Type Customer Account No. 20000 Choose the Process action, and then Apply Entries.
On the Apply Customer Entries page, select the first prepayment invoice, and then choose the Process action, and then choose the Set Applies-to ID action.
Repeat the previous step for the second prepayment.
Choose the OK button.
The Amount fields have now been filled in with the sum of the two prepayment invoices.
To post the journal, choose the Post/Print action, then select Post.
Choose the Yes button.
Invoice the remaining amount
Now Arnie has been informed that the items on the order have been shipped and that the order is ready for invoicing. Arnie creates the invoice for the order.
To invoice the remaining amount
Open the sales order.
Choose the Posting action, then Post.
Select Ship and Invoice, and then choose the OK button.
If you want to preview the invoice, choose the Yes button.
Note
Normally, the shipping department would have already posted the shipment.
Arnie can view the history to verify that the sales invoice was created as intended.
Choose the
icon, enter Posted Sales Invoices, and then choose the related link.
Update the status of prepaid orders and invoices automatically
You can speed up order and invoice processing by setting up job queue entries that automatically update the status of those documents. When a prepayment invoice is paid, the job queue entries can automatically change the document status from Pending Prepayment to Released. When you set up the job queue entries, the codeunits you'll need to use are 383 Upd. Pending Prepmt. Sales and 383 Upd. Pending Prepmt. Purchase. We recommend that you schedule the entries to run frequently, for example, every minute. For more information, see Use Job Queues to Schedule Tasks.
Next steps
This walkthrough covered the following steps to set up Business Central to handle prepayments.
- Set up default prepayment percentages on customers and items.
- Use different methods to calculate the prepayments on an order.
- Calculate the prepayment amount as a percentage of the total on the order.
- Assign one total prepayment amount to the order.
You've also posted a prepayment invoice, created a second prepayment invoice when the order has changed, and posted the final invoice for the remaining amount.
The prepayments capabilities make it easy to set up and enforce prepayment rules for customers and items. They also let you to post every payment against an invoice.
See also
Invoicing Prepayments
Finance
Work with Business Central
Business Process Walkthroughs