We've done a deal with a client there they paid upfront for some work before we knew what the finished total was and the invoice raised.

What's the best way of dealing with that on Solar?

Hello Andover IT,

The simplest solution is to create a new liability account called 'Customer Prepayment', then record a General Transaction from this account to the Cheque Account. Later, when you produce the invoice you can record an invoice payment being 'deposited into' the Customer Prepayment account.

Regards,

Hi Mark

Tried that but not sure I was doing it correctly. Instead I have raised a Credit Note called "PPAY" and noted that it's a Pre Payment.

I have then raised the first invoice which is only part of the total value of the Credit Note and allocated the payment against it.

For example:

Raised credit note for £100
Raised invoice for £20
Allocated £20 of the Credit Note against the invoice
Invoice marked as paid & account showing as -£80

I'm looking at doing this now with a couple of clients and this way gives me some paperwork I can give them as a receipt and shows the balance if I run off a statement.

Can you see any issues with this?

Thanks
Richard

Hello Richard,

I hadn't considered that approach! I assume the credit note Account field is set to 'Cheque Account' and the VAT Treatment is 'Out of Scope'. In that case it sounds fine to me.

One other thing: HMRC want you to account for the VAT when you receive the prepayment, not when you issue the invoice (irrespective of whether you normally use the 'cash' method). This means if the prepayment is in a different VAT period to the invoice, you will need to manually increase the Box 1 figure on the earlier VAT return and decrease it on the later return.

Regards,

Thanks Mark - and should be okay as not VAT registered - but duly noted...just in case one day :o)