Tip #244 – One Way to Handle a Large Pre-Payment


Tip #244
One Way to Handle a Large Pre-Payment

I received an email today from a flowerSoft customer asking this question…

Hey G–

I have a Church that wants to pay a year in advance, how should I
go about that in FS’s accounts receivables?
Or should I just make an invoice with 52 quantities and do it that way? 
What are your thoughts?

I will say they do order other things, like for the Holidays, Poinsettias and Easter Lillies.

This is like their standing order every Friday for their Altar arrangement.

Thanks

This is what I answered.

Here is an idea (in pictures) that should work well because the order is tax exempt…


Make 1 order to cover the entire year to take care of the payment.  Make sure to include the delivery charge (if any) as a separate line item.



I’m assuming they are paying you with a check, but if they have a house account you could make the method of payment ON ACCOUNT and then record the payment when they send you the check.
Just avoid entering the payment before they account has been charged so that there will be no overpayment to deal with.


This is what the finished order should look like.

Then, preferably sometime before the delivery date or on the delivery day of the first order, enter a new order reflecting a single week of the total order. Something like this…


and the use the PREPAID method of payment. If you don’t have it, let me know and I’ll add it for you.



This is how that order should look like when finished. Since the order has a PREPAID method of payment, there will be no balance due and the account’s outstanding balance will not change.

Then go to the recurring orders menu…








Now you have 51 recurring orders all with a PREPAID method of payment and no need to deal with a large overpayment in A/R

I think this works better that entering one big payment that creates an overpayment credit.  Then you’ll have to deal with applying that overpayment every time they make a separate purchase.

I said this works well because is a tax free order. 
If it had been a taxable order, you would have to pay the sales tax up front and then make the recurring orders tax free, which may have required some explanation if audited. 
You could also make the big order tax free, add the total sales tax as a line item and then make all the recurring orders taxable.
That may be a subject for your accountant, so if you ever have this case with a taxable account you should him or her for advice on how to handle.

Hope this helps.

If anyone reading this has a better or different way of how this could have been handled, please let me know.
Thanks

 

 


 

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