Set up prepayments

You use prepayments when:

• You require your customers to submit payment before you ship an order to them.
• Your vendor requires that you submit payment before they ship an order to you.

Prepayments let you invoice and collect deposits from customers or to remit deposits to vendors, to ensure that all partial payments are posted against an invoice. For more information, see Create Prepayment Invoices.

Before you can post prepayment invoices, you have to set up the posting accounts in the general ledger, and you have to set up number series for prepayment documents. You must specify an account for prepayments related to sales and an account for prepayments related to purchasing. You can specify the same posting accounts for all prepayments related to all general business posting groups or general product posting groups. You can also specify specific accounts for specific posting groups for sales and purchasing, respectively. The best method to use depends on your company's requirements for tracking prepayments.

You can define the percentage of the line amount to invoice for prepayment for a customer or vendor, and for all or selected items. After you complete the setup, you can generate prepayment invoices from sales and purchase orders. You can use the default percentages for each sales or purchase line, or you can change the amounts on the invoice as needed. For example, you can specify a total amount for the entire order.

Note

Note:
We recommend that you do not use a prepayment percentage of 100 in the following cases:

• If you are located in North America. Due to how taxes are calculated, a prepayment percentage of 100 can lead to issues with prepayment invoices.
• In all regions, if you manually deduct a payment discount from the invoice. A prepayment percentage of 100 will not automatically leave an amount from which to deduct the discount.

Also, when you're using prepayment percentage of 100, Business Central might need to create off-setting rounding entries. When that happens, you will need to choose a G/L account in the Invoice Rounding Account field on the Customer Posting Groups page. This is true even if you have not turned on the Invoice Rounding toggle on the Sales & Receivables Setup page. If you do not specify an account you you will not be able to post prepayment invoices.

The prepaid amount belongs to the buyer until they receive the goods or services. You must set up general ledger accounts to hold the prepayment amounts until you post the final invoice. Sales prepayments must be recorded in an account for liabilities until the items ship. Purchase prepayments must be recorded in an account for assets until the items are received. In addition, you must set up a separate general ledger account for each VAT identifier.

Important

Important:
Depending on your country or region, additional setup may be required. For more information, see the list of related articles in the See Also section.

To add prepayment accounts to the general posting setup

1. Choose the icon, enter General Posting Setup, and then choose the related link.

2. On the General Posting Setup page, for the relevant lines, fill in the following fields:

   • Sales Prepayments Account
   • Purch. Prepayments Account

If you don't already have general ledger accounts for prepayments, you can open the G/L Account List page from the relevant account field.

To set up number series for prepayment documents

1. Choose the icon, enter Sales & Receivables Setup, and then choose the related link.

2. On the Sales & Receivables Setup page, on the Number Series FastTab, fill in the following fields:

   • Posted Prepmt. Inv. Nos.
   • Posted Prepmt. Cr. Memo Nos.

3. Choose the icon, enter Purchases & Payables Setup, and then choose the related link.

4. On the Purchases & Payables Setup page, on the Number Series FastTab, fill in the following fields:

   • Posted Prepmt. Inv. Nos.
   • Posted Prepmt. Cr. Memo Nos.

Note

Note:
You can use the same number series for prepayment invoices and regular invoices, or you can use different number series. If you use different series, they must not overlap because there must not be any numbers that exist in both series.

To set up prepayment percentages for items, customers, and vendors

For an item, you can set up a default prepayment percentage for all customers, a specific customer, or a customer price group. If you don't want to apply the same prepayment percentage to all customers, you must specify which customers or which customer price groups the prepayment percentage applies to.

1. Choose the icon, enter Items, and then choose the related link.
2. Select an item, and then choose the Sales Prepayment Percentages action.
3. On the Sales Prepayment Percentages page, fill in the fields as necessary. Hover over a field to read a short description.

For a customer or vendor, you can set up one default prepayment percentage for all items and all types of sales lines. You enter the percentage on the customer or vendor card. The following procedure shows how to specify a prepayment percentage for a customer, but similar steps apply to vendors.

1. Choose the icon, enter Customers, and then choose the related link.
2. Open the card for a customer.
3. On the Payments FastTab, fill in the Prepayment % field.
4. Repeat the steps for other customers or for vendors.

Tip

Tip:
You can also access the Sales Prepayment Percentages page from the customer or vendor card.

To determine which prepayment percentage has first priority

An order might have a prepayment percentage on the sales header, and a different percentage for the items on the lines. To determine which prepayment percentage applies to each sale line, Business Central looks for and applies the first default percentage in the following order:

1. A prepayment percentage for the item on the line and the customer that the order is for.
2. A prepayment percentage for the item on the line and the customer price group that the customer belongs to.
3. A prepayment percentage for the item on the line for all customers.
4. The prepayment percentage on the sales or purchase header.

In other words, the prepayment percentage on the customer card only applies if no prepayment percentage is set for the item. However, if you change the contents of the Prepayment Percentage field on the sales or purchase header after you create the lines, the prepayment percentage on all of the lines update. The update makes it easy to create an order with a fixed prepayment percentage, regardless of the percentage set on items.

To automatically release sales orders when prepayments are applied

You can save time by setting up a job queue entry that will automatically release sales orders that require prepayment after payments are applied. Automating the process saves you the step of releasing the sales order.

1. Choose the icon, enter Sales & Receivables Setup, and then choose the related link.
2. In the Prepmt. Auto Update Frequency field, specify how often you want the job queue entry to run.

Tip

Tip:
While you're here, consider adding a safeguard against shipping or invoicing sales orders that have unpaid premayment amounts. If you turn on the Check Prepmt. when Posting toggle, Business Central will prevent people from posting orders with outstanding prepayment amounts.

3. Choose the icon, enter Job Queue Entries, and then choose the related link.
4. Set up the Upd. Pending Prepmt. Sales job queue entry, for example, by using the settings on the Recurrence FastTab to schedule how often you want it to run. For more information, see Use Job Queues to Schedule Tasks.

See also

Invoicing Prepayments
Walkthrough: Setting Up and Invoicing Sales Prepayments
Understanding the General Ledger and the COA
Finance
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