RisingERP - Advance Payment Entry

Advance Payment Entry

An Advance Payment refers to the payment made by a Customer/Supplier before the issuance of an invoice.

Typically, advance payments are made in scenarios involving high-value transactions. For instance, envision a customer, Alex , placing an order for a luxury furniture item amounting to ₹14,000. As a standard practice, Alex is required to provide an advance payment of ₹4,000 in cash before the furniture production commences.

In the ERP, the creation of an advance payment entry is facilitated using the Payment Entry feature. If a Sales Order exists, a Payment Entry for the advance amount can be directly generated. Alternatively, a standalone Payment Entry can be created for the Customer. Similarly, an advance Payment Entry for a Supplier can be established via a Purchase Order.

Note: If a payment is not linked to an invoice, it is categorized as an advance payment. These advance payments are reflected in the Accounts Receivable and Payable reports.

1. Prerequisites

To initiate the creation of an advance payment entry, the following prerequisites must be fulfilled:

1. Party (Customer/Supplier)
2. Payment Account (Bank or Cash account)

2. How to create an Advance Payment Entry

Once a Sales Order or Purchase Order is submitted, an option to create a Payment against it becomes available. Alternatively, a new Payment Entry can be generated, allowing manual selection of values such as the Party and payment account. Below are the steps to create an Advance Payment against a Sales Order.

1. Navigate to Sales Order and click on Make > Payment Entry.
2. Set/verify the accounts.
3. Save and Submit.

Any Payment Entry not linked to an invoice is automatically classified as an advance payment by the RERP system.

In the instance where a Customer provides a $10,000 cash advance, it is recorded as a credit entry against the Customer's Receivable account. To maintain balance within the Double Accounting system, $10,000 is debited against the Company's cash account.

2.2 Allocating Advance Payment in Invoice

When generating an invoice, it is possible to check for any existing Advance Payment against the relevant Party.

By clicking the "Get Advance Received" button, any Advance Payment Entries associated with that party will be fetched. Once fetched, the advance payment amount can be allocated against the invoice, thereby promptly reducing the Outstanding Amount for that specific invoice.

Lastly, Save and submit the Sales Invoice to finalize the transaction.