Using Customer Prepayments and Deposits

In some instances a Customer may be required to make a partial payment for a product or service, in advance, before receiving the product or service. This is a referred as a Customer Deposit or Prepayment.

The remaining payment will be made on completion of the service or delivery of the product.

Since the product or service has not yet been delivered, when receiving a deposit, the money is neither owned by you nor owed to you.

This payment is recorded as a liability, until the service/product has been delivered.

Deposit | Prepayment: Setup

The following section explains the setup required for processing a Customer Deposit in Salesorder.

Setup Accounting for Deposits | Prepayments

You can use an existing account or create a new account. To create a new account, go to:

ACCOUNTING > Chart of Accounts > +

Select Current Liability

Enter details for New Current Liability Account.

Set Account Name as Customer Deposits.

Click Create Account.

Create Deposit | Prepayment Item

Set up a Charge Item with its Income account mapped to the current liability account Customer Deposits.

To create a Charge Item, go to:


Select Item type Charge

Set Item Code to Prepayment (or any name your sales team uses to describe customer prepayments)

On the same screen, under Accounting tab,

Set Income Account to Customer Deposits.

Record Deposit | Prepayment on Sales Order Document

You’ll need to be careful with this method. Take your time.

  1. Enter the ordered Line Items.
  2. Enter two Deposit Charge Items on separate rows.
  3. Enter the Deposit amount in the Unit Price column against each Deposit Charge Item.
  4. Sign the second Deposit Item’s Unit Price with a minus (-).
  5. If you are going to send the Sales Order to the Customer, you’ll want to show the deposit on the PDF.
  6. Omit the row with the unsigned Unit Price, so as the Sales Order only shows the Deposit Item with the signed amount.
  7. Here’s how: Hiding Rows when printing a Document

    The display of the rows of a Document when it’s printed or emailed as a PDF can be disabled, by clicking the row number.

    1. Edit the Document.
    2. Click on the row number you want to omit from printing. The row number will appear faded.
    3. Click Print to check the result. (Just open and review the PDF)
  8. You can now link the recording of the Deposit on a Cash Sale or a Sales Invoice to this Sales Order, here’s how…

Receive Deposit | Prepayment on Sales Order Document

  1. Go to the Sales Order you prepared as above.
  2. Select the row containing the unsigned Deposit Charge Item.
  3. Create an Invoice or a Cash Sales.
  4. If you use a Sales Invoice, save and send it with just the Deposit Item.
  5. If you use a Cash Sale, take and process the payment on the Payment Methods tab. Then send the Cash Sale to the Customer.
  6. In both cases, the Sales Invoice or Cash Sale will be linked to the Sales Order (Our Ref), and the respective Document will appear in the Transactions tab on the Sales Order.

When you review the Sales Order, you’ll notice the row with the Deposit Charge Item has an indicator Invoiced.

When you invoice the residual of the Sales Order, because the Deposit has been invoiced/collected the Invoice status will set to Fulfilled.

Record Deposit | Prepayment without a Sales Order Document

This is an optional step.

See Using Memos.

When you take the deposit you can create and link a Memo to the Cash Sale or Sales Order to record details about the transaction, and act as a reminder.

Receive Deposit | Prepayment without Sales Order Document

See Using Cash Sales, if this is the first time you’ve encountered the Cash Sale Document.

  1. Create a Cash Sale.
  2. Add the Charge Item and set the Unit Price column to the deposit/prepayment amount.
  3. On the Payment Method tab record and process/save the payment details.
  4. Email the Customer a copy of the Cash Sale Document.
  5. Add a Memo to the Cash Sale (type Deposit) and record details.

Account for Deposit | Prepayment on Sales Invoice without Sales Order Document

When it’s time to Invoice the customer, you’ll need to account for the deposit. To do this:

  1. Go to the Transactions tab on the respective Customer master and locate the original Cash Sale.
  2. If you created the Memo type Deposit, locate the Memo on the Memos tab using the SEARCH OPTIONS > Memo type = Deposit. The Memo will be linked to the original Cash Sale. Bookmark the Memo and the Cash Sale for reference.
  3. Create the Sales Invoice.
  4. Add the Deposit Charge Item as a Line Item, with the Unit Price set to the original Deposit balance.
  5. Sign this Unit Price with a minus (-) to subtract the deposit from the Invoice.
  6. Save and email the Invoice.

In this article

Was this helpful?