Overview of Prepayments in Receivables

Use Prepayments in Receivables to manage advance payments that you receive from your customers.

You may receive advance payments, for example: against expenses related to a project contract; full or partial payment against a sales order; a mandatory advance payment for goods and/or services to be delivered on a specified date.

In addition, in some countries the tax authorities require companies to issue a taxable prepayment invoice before or with any advance payment.

You can create and apply both manual and imported prepayment invoices:

• Use the Create and Edit Transaction pages, and the Manage Transactions page, to manually create and apply prepayment invoices against sales invoices.
• Use the AutoInvoiceImportTemplate and the Import AutoInvoice process to create prepayment invoices and apply them to sales invoices.

When a prepayment invoice is applied to a sales invoice, the outstanding balance of the sales invoice is either reduced or settled by the applied amount. The original accounting and tax entries of the prepayment invoice are reversed.

To use Prepayments in Receivables, you must complete these setups:

• Create Prepayment Receivables Activities
• Create Prepayment Transaction Types
• Create Prepayment Transaction Sources (imported prepayment invoices)

You create and apply prepayment transactions against the applicable primary ledger and all business units assigned to this primary ledger. You can only process prepayment transactions in the ledger currency.

You can enable document sequencing on prepayment invoices and credit memos using the Sequencing section of the Specify Options page of the primary ledger.

All prepayment accounting activity is maintained in a separate Prepayment account assigned to the Prepayment Receivables activity for a business unit. Prepayment accounting doesn't affect your Revenue account.

Create Prepayment Receivables Activities

Use the Manage Receivables Activities page to create a Prepayment Receivables activity for each business unit that will create and use prepayment invoices.

The Prepayment Receivables activity designates a separate general ledger account for all prepayment distributions. You can't create prepayment transactions unless a Prepayment Receivables activity is defined for the applicable business unit.

To create a Prepayment Receivables activity:

1. Navigate to the Manage Receivables Activities page.
2. Click the Plus (+) icon to open the Create Receivables Activity page.
3. In the Business Unit field, select the business unit you want.
4. In the Name and Description fields, enter a name and description that identifies this specific Prepayment Receivables activity.
5. In the Activity Type field, select Prepayment. When you select this value, the page:
   • Displays the Prepayment Invoice Applications field.
   • Sets the GL Account Source field to Activity GL Account and read-only.
   • Sets the Tax Rate Code Source field to None.
6. In the Prepayment Invoice Applications field, select:
7. • Use any prepayment: Allows application of eligible prepayment invoice lines against a sales invoice.
   • Use paid prepayments only: Allows application of only fully paid prepayment invoice lines against a sales invoice.
8. In the Activity GL Account Source field, enter the account where prepayment invoice distributions will be created.
9. Save your work.

Create Prepayment Transaction Types

Use the Manage Transaction Types page to create prepayment transaction types.

Create one or more prepayment transaction types with the Transaction Class of Invoice and the Transaction Subclass of Prepayment.

To create a prepayment transaction type:

1. Navigate to the Manage Transaction Types page.
2. Click the Plus (+) icon to open the Create Transaction Type page.
3. In the Transaction Type Set field, select a reference data set.
4. In the Name and Description fields, enter a name and description that identifies the transaction type as a prepayment transaction type.
5. In the Transaction Class field, select Invoice.
6. In the Transaction Subclass field, select Prepayment. This sets to read-only:
   • Creation Sign field with Positive Sign enabled. Prepayment invoices can't have a zero or negative transaction or line amount.
   • Natural application only option enabled. You can't use overapplications on prepayment invoices.
7. In the Transaction Status field, select Open.
8. In the From Date field, enter the date from which this transaction type is active.
9. Ensure that the Open Receivable and Post to GL options are enabled.
10. Complete the remaining fields according to your requirements.
11. Save your work.
12. Repeat these steps for each transaction type that you want to create for prepayment invoices.

Create Prepayment Transaction Sources

Use the Manage Transaction Sources page to create imported prepayment transaction sources.

Create one or more prepayment transaction sources to assign to the Import Receivables Transactions Using AutoInvoice process to both create prepayment invoices and apply prepayment invoices to sales invoices.

To create a prepayment transaction source:

1. Navigate to the Manage Transaction Sources page.
2. Click the Plus (+) icon to open the Create Transaction Source page.
3. In the Transaction Source Set field, select a reference data set.
4. In the Name and Description fields, enter a name and description that identifies the transaction source as a prepayment transaction source.
5. In the Type field, select Imported.
6. Ensure that the Active option is enabled.
7. In the From Date field, enter the date from which this transaction source is active.
8. Complete the transaction numbering and document numbering fields according to your requirements.
9. Complete the Receipt Handling for Credits field according to your requirements. If you leave the field blank, the Import AutoInvoice process creates all credit memos as Incomplete.
10. Don't enter a value in the Standard Transaction Type field. You can only select a Prepayment transaction type from the Import Receivables Transactions Using AutoInvoice process parameters.
11. In the Transaction Completion field, select No control required.
12. In the Invalid Line field, select Reject Invoice.
13. In the Accounting Date in a Closed Period field, select Reject.
14. Complete the Import Information section according to your requirements.
15. Save your work.
16. Repeat these steps for each transaction source that you want to create for prepayment invoices.