How to handle invoice deposits or pre-payments

SystemSystem Posts: 236 admin

imageHow to handle invoice deposits or pre-payments

If you work with clients on an ongoing basis, or if you're beginning a large project, you may want to accept a deposit or pre-payment from your customer. We'll walk you through how you can easily h...

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edited February 5, 2019 in Help Center Discussion
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  • jwillowjwillow Member Posts: 3

    I want to edit an existing invoice payment. It's probably so simple that no one thought to give instructions.

  • zrgravityzrgravity Member Posts: 1

    Will this duplicate the income amount? Is income only shown for the transactions on the income account, or for invoices against the pre-pay liability account?

  • PaulCPaulC Administrator Posts: 77 admin

    Hi @jwillow,
    If you click into a paid invoice record, the 3rd box on the page (above the main body of the invoice) deals with payments. Simply click to edit.

    Note, however, that you cannot edit a card/bank payment received through Wave Payments. That amount is what it is, and can only be changed if you refund the transaction.

    Hope that helps!

  • PaulCPaulC Administrator Posts: 77 admin

    @zrgravity - I guess you're referring to the part of this article about recording an invoice payment from the Customer Prepayments account?
    In that case, no; this will not create a duplicate payment. This is because the initial receipt of funds into the Customer Prepayments account is not treated as income; it is money arriving in your bank account (an asset), but offset by the liability to the customer. Creating the invoice creates records an amount of income, which is initially balanced by Accounts Receivable. Marking the invoice paid clears the Account Receivable with the Customer Prepayment.
    Hope that makes sense!

  • jwillowjwillow Member Posts: 3
    @PaulC This is great, thank you.
  • jared420jared420 Member Posts: 4

    Why cant there just be an option to have a deposit amount due a certain day and the remainder do another set date?

  • Ryan_WRyan_W Administrator Posts: 461 admin

    @jared420 while I respect that this would be convenient, it's tricky to build that in based on how the invoice creation date directly reflects when this income is going to be recorded as an expected payment to your A/R. What you're describing would be better served by having two separate invoices; otherwise, the workflow described in the article is your best bet.

  • jared420jared420 Member Posts: 4

    Yea, my current way is to send an estimate, then send the deposit invoice and then the final balance invoice. I just wish there was a setting to streamline this, making it automatically based on dates or time frames would be great too. Making a refundable deposit would also be great. Could also be as simple as

  • CasaChangoCasaChango Member Posts: 1

    How do you record retainers?
    This is a large amount the customer deposits from which multiple invoices are paid from.
    Where should the retainer amount be recorded, and how is this used to pay an invoice?

  • SamdSamd Administrator Posts: 560 admin

    Hey @CasaChango - right now Wave's invoicing and bookkeeping is targeted towards pay-per-service style invoicing, rather than having a retainer. Deposits, pre-payments, and credits are all things we're looking into making easier on invoices, but right now they require a bit of a workaround to track. Right now to generate a retainer, you could create a retainer liability account in Accounting > Chart of Accounts. You'd record this first as money deposited to your bank account, at which point you could transfer over to the liability account. Once an invoice comes due, you would then transfer the value back to your bank account, and categorize it against the open invoice(s) for that customer in Wave.

  • novicenovice Member Posts: 1

    Hi! As I am very new to Wave, I would greatly appreciate help on the following.

    I have the following scenario in 4 steps:
    1. Customer makes pre-payment for goods
    Dr Cash in transit (cash is with debit / credit card machine provider)
    Cr Prepayment (liability account)

    1. Cash comes to my bank account
      Dr Cash (my bank account)
      Cr Cash in transit (cash is with debit / credit card machine provider)

    2. Customer collects goods
      Dr Prepayment
      Cr Sales

    3. Recording a reduction in inventory
      Dr Cost of goods sold
      Cr Inventory

    I have a few hundred of these transactions in Excel that needs to be uploaded to Wave. Should I upload them as invoices via Wave Connect, which allows me to include the customer name? Or should I upload them as journal transactions if there is a way to upload the customer name as well?

    Please kindly advise on the best and efficient methods to do the above. A step by step guide would be greatly appreciated. Thanks!

  • JamieDJamieD Administrator Posts: 876 admin

    Hey @novice. I think that the best/most efficient way of accomplishing what you are trying to do in Wave is importing/uploading your transactions using Wave Connect. From my understanding, you should also be able to add a customer with the transactions that you are importing into Wave.

    Alternatively, you could technically import invoices into Wave using Connect, which would give you a solid paper trail.. but you will still need to manual create all of the transactions associated with that invoice in Wave (marking them as paid into a money in transit account, categorizing the deposit transaction as a 'transfer from money in transit' account, and also simultaneously factoring in the overpayment).

  • JessiJessi Member Posts: 1
    I operate in an industry where I have to keep the client's money in 'trust' until I have completed the work and only then can I issue an invoice.
    Based on the threads below, my current system is:
    1. Issue an estimate, which I rename as a 'Deposit Request'
    2. Receive monies from client directly into my client account. I mark these transactions as 'Retainer account' under liabilities which I set up under Chart of Accounts.
    3. Complete work and issue invoice, which I record as being paid from retainer account.
    4. Transfer monies from client account to business account.
    Just to confirm:
    - Is there definitely no duplicate in receiving those funds firstly into my client account and then, additionally when it shows up as an invoice payment?
    - How should I mark the transactions where the funds are going from client account to business account. Is it fine just to mark them as 'transfer from account A to B'?
    - When issuing invoice - does it make most sense to convert the estimate/deposit request into an invoice or should I just generate a new invoice?
    - I need to be able to generate a Customer Statement which shows the deposit being received (and held) and then being appropriated once the work has been completed. How can I record that initial deposit from the client so that it will be recorded against his or her name? Can I link it to the estimate/deposit request?
    edited May 16, 2019
  • SamdSamd Administrator Posts: 560 admin

    Hey @Jessi - that's an excellent workflow and way of tracking money held in trust.

    • There shouldn't be a duplicate in this case as you'd be journaling the funds from the trust account to your income account, which will show money being transferred out of a held state, rather than redeposited.
    • This would definitely also be a possibility. You'd need to create an income transaction into your bank account, categorize as 'Transfer From...' and then 'Retainer account' as the origin.
    • In this case either would work, but I think I'd lean (personally) towards using them separately so that you have a record of both in Wave, but whichever option you prefer.
    • This last one is a little tougher - right now Wave could show the deposit in the customer statement, but not the period in which it is held. This is something we're working on streamlining though. Right now because you can't have a customer tied to an account (such as a liability account), when tracking money owed or deposited, it doesn't actually update the requisite customer statement. I'm going to take this to our Product Team however. You should be seeing an update that makes this sort of thing easier, but this is an interesting use-case that I want to make sure is considered!
  • SayulitaPropertiesSayulitaProperties Member Posts: 1
    The Customer pre-pays a retainer before any invoices are created. How do I record this pre-payment so that it shows on their Customer Statement as an outstanding credit for them. Every way I have tried does not show on the Statement. Very frustrated!
  • MollyMolly Member Posts: 9
    Hi. I have made a deposit into my suppliers account and would like to register that in Wave but the payment is for multiple invoices received in the previous month . When I am in transactions it gives me the option of splitting the transaction but not to multiple invoices - only to different accounts. I there a way for me to do this.
  • SamdSamd Administrator Posts: 560 admin

    Hey @SayulitaProperties - that is a current limitation in Wave's prepayment functionality, as if you generate a liability account for a customer, there is no way to tag said customer, and thus update their statement with it. However, you can record this prepayment as income into your Wave account via Accounting > Transactions. Categorize as Sales or Services (or a specific income account), title 'Prepayment', and then assign it to your customer by selecting 'Add a Customer'. Once an invoice is actually generated, you can re-categorize this pre-payment against this open invoice instead.

    edited May 28, 2019
  • alexlewiszarkosalexlewiszarkos Administrator Posts: 420 admin

    Hi @Molly . Are you using Bills to track the invoices that your supplier sent you? If so, you can split the payments and categorize them as Payment sent for a Bill in Wave > select the unpaid Bill. This will mark the corresponding Bill as paid, and also account for it in your transactions page.

  • LenyLeny Member Posts: 0

    Hi, my nature of business is one where we will need to bill the customer for a refundable/deductible initial deposit. However, this transaction should not be reflected as income but liability instead. When the customer completes his engagement with us, we will refund or deduct his total charges with this initial deposit.
    I created the deposit as an item on our invoice, however, I could not point this item to be recorded as a liability instead of an income.

    Any suggestion on how to go about with this?

    edited June 25, 2019
  • JordanFromWaveJordanFromWave Administrator Posts: 230 admin

    @Leny @yoncen I've moved your post into this ongoing discussion because I feel like you can see the steps because the article that the discussion is happening on should have the answers that you are looking for. Take a look at the workflow that we suggest for deposits and let me know if you still have remaining questions. We will be more than happy to help :)

    edited June 26, 2019
  • yoncenyoncen Member Posts: 0

    I'm starting a custom wedding stationery business, and I require a deposit up front before the project, as well as a final deposit to settle up. I don't think recurring invoices would be best since these are one-time customers, they just need to pay twice.

  • TMitchell83TMitchell83 Member Posts: 2

    I'm looking for a feature, which I don't think exists in Wave (but I'm hoping it is developed), that allows me to sent an invoice for a percentage amount of an invoice and that will allow me to manually invoice against the total invoice until paid in full. Reoccurring invoicing doesn't help me at all as my invoice dates are not set.

  • CultureGapCultureGap Member Posts: 2

    Question: My customer has paid me for the entire summer season ($8000) in May. But I want to not reflect that as a lump sum in May's Income report, and instead be able to see $2000 income for each month in the report. That way, when I compare the month's income statements to how I did last year, they are more accurate.

  • ckeen_1244ckeen_1244 Administrator Posts: 151 admin

    @TMitchell83 Interesting! Can you say more about your business situation which would make this functionality valuable to you?

    @CultureGap I think our best workaround would be what's written in the article under "How to account for deposits or pre-payments in Wave". Although if the lump sum was already paid through Wave (and I see you have Payments set-up), you wouldn't be able to edit this lump sum invoice payment deposit.

    Just thinking...I'm wondering if you'd like to create four separate invoices for $2000.00 payments over the course of four months. You can manually mark them as paid and the income would then be split up over time. Then, if not paid through Wave, you could delete the $8000.00 lump sum deposit transaction in Wave. The only problem is your accounts wouldn't exactly reconcile as Wave's records would be out of sync with your bank statement. Here again, this wouldn't work if you've processed the payment through Wave (you wouldn't be able to delete the invoice payment).

    Your Wave books should always match your bank statement though so I'm wondering if this type of business analysis would be worth prioritizing over proper bookkeeping? Let me know your thoughts!

  • TMitchell83TMitchell83 Member Posts: 2

    Creating four separate invoices for the amounts required would work, I could mark the invoices due at a date determined later on (I can guesstimate a date) and should that change I can just change the invoice due date. To keep things less confusing I imagine these invoices would need to be kept as drafts so as not to confuse the client.

    Ideally, what I'm talking about is being able to give a client an estimate for a complete job (I am a contractor) with materials and labour all included. Typically, such estimates are then broken down into percentages to be paid at pre-determined intervals throughout the project. With this in mind, I have provided an estimate to my client as noted above, however, Wave doesn't allow me to break up payments requested into "sub-invoices" if you will where I can request certain payments without having to create another separate invoice leaving the original estimate/invoice unchanged. In the end, I have had to invoice separately and then simply go back and delete the original lump sum estimate/invoice so that my accounts reconciled.

    Being able to provide an estimate that is then converted into an invoice with the ability to request payments either at preset intervals like the recurring invoicing function or at manually selected times for specified amounts would be a significant bonus to Wave's functionality for contractors like me. I would add as well, the ability to add a markup value to the estimate/invoice without having to add it in manually item by item would also be very helpful.

    Hopefully that explains things right? Please do let me know if you have questions.

  • alexlewiszarkosalexlewiszarkos Administrator Posts: 420 admin

    Hey @TMitchell83 . Thanks for this in-depth and concise explanation. This really helps us better understand your business needs. I'll pass the feedback along to the team :)

  • javelinclarkjavelinclark Member Posts: 1

    Here is how I worked around it. I run a technical school, it is similar to construction companies in terms of how to account for revenue. This is how to account for unearned revenue and recognize it as revenue over time based on progression of the project:
    I would typically record an invoice for $0 to a new customer.
    This customer usually pays up front for three month or a full year of technical training, so I would record payment on the $0 invoice, let's say $12,000 for a whole year.
    During the payment form, I would select other and then my unearned revenue account that I created in the Chart of account.
    I would then create recurring invoices which hits the revenue account each month for $1,000 at the end of the month.

    This way, you record $12,000 of unearned revenue, then $1000 would be accounted for as revenue automatically each month.

  • ddewolfeddewolfe Member Posts: 4

    My issue is that I require a customer deposit to hold a seat for a course in the future. The deposit is not taxable so at the moment I do:
    1. Invoice for deposit. It goes into income, which it is not.
    2. I journal entry the deposit from income to deposit holding account.
    3. When final invoice is sent, the deposit is deducted.
    4. Finally I journal the deposit from holding to income.

    It would be great to be able to assign deposits in the items list to the deposit holding account rather to an income account. Would save a lot of journal entries.

  • ckeen_1244ckeen_1244 Administrator Posts: 151 admin

    @javelinclark Well done! If you set-up a recurring invoice and select an end date on the recurring invoice scheduler, Wave operates on an accrual basis so you can calculate for how much will be coming in for an invoice being issued over time. There is also the Cash Flow Report option which calculates for exactly how much you have at a specific point in time (in other words, it doesn't account for incoming or outgoing funds).

    @ddewolfe Thanks for sharing your thoughts on this! Journal entries do take some thinking!

  • ddewolfeddewolfe Member Posts: 4

    Yes ... but
    Some of my products and services are deposits.... to hold a set for a future course. These deposits are NOT taxable and are NOT income until the final balance is paid. I used to use quickbooks Online, which allowed me to have these deposits go directly to a deposit holding account (liability). Wave will not let me do that ... only income accounts are available.

    So I have to do 2 journal transactions for each sale, to move the deposit out of income and later at the time of the final payment, put it back.

    A real pain....

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