Automation of Invoicing and Receipt Applications for Advance Payments

Prepayment is the process in which a customer makes a partial or full payment in advance for your goods or services. 

Countries with transactional taxes legally require companies to issue a taxable document following or preceding the actual advance payment. The document is commonly called "Customer Prepayment Invoice”. You create prepayment invoices to record advance payments against, for example, a sales order or purchase order for goods and services.

Use AutoInvoice to create prepayment invoices for advance payments from customers against transactions originating from third party or external sources.

When it is time to apply a prepayment invoice to a sales invoice, the original accounting and tax lines of the prepayment invoice lines are reversed and the outstanding balance of the sales invoice is reduced or closed by the amount applied.

Business benefits include:

  • The prepayment invoice supports regular invoice processing, including credit memos, receipt applications, and document sequencing.
  • Prepayment invoices help the business with accurate receivables estimates by tracking a customer's advance payments.
  • The Prepayment Invoice does not affect the revenue account when it is accounted and will only credit a Prepayment Account.

Steps to Enable

Before you create and apply prepayment invoices, complete these setup steps:

  • Create prepayment receivables activities.
  • Set up prepayment transaction types.
  • Create Subledger Accounting rules. 

1. 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.

  • Set the GL Account Source field to Activity GL Account.
  • In the Activity GL Account Source field, enter the account where prepayment invoice distributions will be created.
  • Set the Tax Rate Code Source field to None.

Prepayment Receivable Acitivity

Prepayment Receivable activity

2. Create Prepayment Transaction Types.

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

  • Use a name that identifies the transaction type as a prepayment transaction type.
  • In the Transaction Class field, select Invoice.
  • In the Transaction Subclass field, select Prepayment.
  • Enable the Natural Application Only option. You cannot use overapplication on prepayment invoices.

Prepayment Transaction Type

Prepayment Transaction Type

3. Configure Subledger Accounting Rules.

Set up new journal line rules and journal entry rule sets in Subledger Accounting for the Invoice and Credit Memo event class, to create line amounts in the Prepayment account. Assign the new rules and rule sets to the accounting method used in the Specify Ledger Options setup.

Event Class: Invoice

  1. Navigate to the Edit Journal Line Rule page. 
  2. Create a duplicate of the predefined rule Invoice Revenue and use it to create the rule Invoice Prepayment. 
  3. In the Accounting Class field, select Prepayment.
  4. Enter the Condition: "Transaction Distribution Account Class" = ORA_PREPAYMENT 'And' "Rounding Correction Indicator" Is null. Prepayment Invoice Journal Line Rule
  5. Create a custom Journal Entry Rule Set by duplicating the predefined journal entry rule set "Invoices - Default Accrual" and add the new journal line rule that you created above.

Event Class: Credit Memo

  1. Navigate to the Edit Journal Line Rule page. 
  2. Create a duplicate of the predefined rule Credit Memo Default Revenue and use it to create the rule Credit Memo Prepayment.
  3. In the Accounting Class field, select Prepayment.
  4. Enter the Condition: "Credit Memo Distribution Account Class" = ORA_PREPAYMENT. Prepayment Credit Memo Journal Line Rule

  5. Create a custom Journal Entry Rule Set by duplicating the predefined journal entry rule set "Credit Memos - Default Accrual" and add the new journal line rule that you created above.

Create Prepayment Invoices

  1. Download the AutoInvoice Import FBDI spreadsheet. 
  2. Populate prepayment invoice lines in the spreadsheet. 
  3. Generate the CSV file and import it into Oracle Universal Content Management (UCM). 
  4. Submit the Load Interface File for Import process to load the invoice lines into the AR Interface table. 
  5. Submit the Import Receivables Transactions Using AutoInvoice process to create the prepayment invoices. 

NOTE: The transaction source assigned to AutoInvoice must have the Invalid Line field set to Reject Invoice. 

       6. Review the prepayment invoices in the Manage Transactions page.

Apply a Prepayment Invoice to a Sales Invoice

  1. Populate the prepayment lines in AutoInvoice Import FBDI spreadsheet with negative amounts, along with the sales invoice lines.
  2. Populate additional Line DFF attributes for any prepayment application lines. 
  3. The combination of additional line DFF attributes must match the combination of the line transaction DFF attributes in the prepayment invoice.
  4. Generate the CSV file and import it into Oracle Universal Content Management (UCM).
  5. Submit the Load Interface File for Import process to load the invoice lines into the AR Interface table.
  6. Submit the Import Receivables Transactions Using AutoInvoice process to apply the prepayment invoice to the sales invoice.

NOTE:

  • Prepayment invoice holds the outstanding Prepayment balance that can be applied to other Sales Invoice(s).

  • Prepayment invoice will account the balance to the Prepayment account; this doesn't impact the revenue account.

  • Prepayment accounting entries of the sales invoice with applied prepayment lines will be reversed and the actual revenue booked.

Tips And Considerations

  • You can only create prepayment invoices and apply them to sales invoices using the AutoInvoice FBDI and the Import AutoInvoice process. SOAP, REST API, and manual transaction creation are not supported.
  • Invoices must be Complete.
  • Prepayment and Sales Invoice creation and application is only supported in the ledger currency. Foreign currency transactions are not supported.
  • Other transaction activities, including credit requests, disputes, and adjustments, on prepayment invoices and sales invoices with prepayment lines are not supported using SOAP, REST API, and AR transaction pages.
  • You can only credit full prepayment invoice or sales invoice having prepayment application lines. Partial credits are not supported.
  • Overapplication on prepayment lines or prepayment application lines (sales invoice) is not supported.

Access Requirements

  • Accounts Receivable Manager
  • Accounts Receivable Specialist
  • Billing Manager Segregated Role
  • Billing Specialist Segregated Role