Process Supplier Overpayment

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This procedure explains how to record the transactions required when you overpay a supplier.

Note that if the payment is an overpayment of a single invoice and there are other outstanding invoices for the supplier, then this would not be considered an overpayment in the example being covered here. You should assign the excess payment to one of the other invoices.

Let's assume you have only one invoice outstanding for €200 and you pay your supplier €250.

1. Create a Supplier Overpayments account in your Chart of Accounts

If it doesn't already exist, create an account in your Chart of Accounts called 'Supplier Overpayments' (Account Group - Assets, Account type - Current Assets, Default VAT - 'No VAT').

2. Enter a payment against the supplier invoice

Use the Spend Money option to enter €200 as a Supplier Invoice Payment transaction to settle the outstanding invoice. If you are entering the payment from an imported bank statement, then you will need to change the Amount Paid from €250 to €200. The reason for this is that you need to enter a separate Spend Money for the €50 overpayment (see the next step).

3. Enter a separate payment for the overpayment value

Use the Spend Money option to enter the €50 overpayment as a General Payment. In the line item, select the 'Supplier Overpayments' account and apply the 'No VAT' VAT Code.

4. Refund or Offset the overpayment

If you are going to receive a refund for the overpayment, continue with Step 4a. If you want to apply the overpayment against the next invoice you receive, then go to Step 4b.

4a. Refund the overpayment

Enter a Purchase Credit Note transaction for €50. In the line item, select the 'Supplier Overpayments' account and apply the 'No VAT' VAT Code. When you pay the supplier, use the Receive Money option to enter a Supplier Refund.

4b. Offset overpayment against next invoice

Enter a Purchase Credit Note transaction for €50. In the line item, select the 'Supplier Overpayments' account and apply the 'No VAT' VAT Code. Allocate the Purchase Credit Note to the next available invoice.

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