How to reconcile an overpaid customer Invoice

Example:

• Invoiced amount: £750.00
• Customer payment: £1000.00
• Overpayment: £250

If a customer has overpaid their invoice, follow these steps to reconcile the overpayment

1. Access the Bank Transactions screen
2. Press Split/Attach on the transaction
3. Press Attach/Match document
4. Select the customer invoice
5. Press confirm selection

The overpayment 'still to review' needs to be balanced so the transaction can be confirmed.

Reconciling the overpayment depends on the scenarios below:

Scenario A:

The customer's next invoice has already been created:

1. Press 'Attach / Match document' again
2. Select the next customer invoice
3. Done
4. Confirm

 

Scenario B:

The customer's next invoice has not yet been created, but will be created in the future:

1. Press 'Split Customer':
   
2. Select the category 'Pre-payment from customer'.
3. Enter the same customer name as per the invoice.
4. Manually input the amount 'still to review' in the white box.
5. Apply the relevant VAT if VAT registered.
6. Press Done.
   
7. Confirm the transaction
   
   

Record the pre-payment when the customer's next invoice has been created:

1. Open 'Page 2' of the invoice.
2. Press 'Allocate payment deposit'.
3. Select the prepayment.
4. Press Done to deduct the previous overpayment from the invoice

Accrual Based Accounting

For customers who use accrual-based accounting, once the pre-payment is applied to the invoice, the VAT on the sales receipt will no longer be recorded on your VAT return. Instead, the VAT applied on the invoice is registered like any other invoice. This ensures that there are no duplicate VAT entries on your VAT return.

If you use a separate invoicing system, follow the same steps as above and create an invoice as a ‘shadow invoice’ in Business Finance Assistant. The shadow invoice should contain the same details included on the invoice created in your separate invoicing system.

Scenario C:

The customers future invoice has already been created, and you want the customer statement to accurately show the overpayment:

1. Repeat the steps in Scenario B, but select the category 'Customer Payment for invoice' instead of the 'Pre-payment' category.
   

Scenario D:

The customer's overpayment is recorded as income and a credit memo created for a future refund or to deduct from the next invoice:

1. Press 'Split customer'.
2. Populate the 'Customer', Category, and VAT information to account for the additional income, whether it's a donation or a sale.
3. Press Done.
4. Confirm transaction.

Create a customer credit memo to keep the credit on file for your customer:

1. Go to Customers
2. Click on the customer to open it
3. Press 'New Action'
4. Select 'New credit memo'
5. Populate the details
6. Finalise by pressing Email, Print or Download

The customer credit memo should be attached to Page 2 of a future invoice or if the overpayment is physically refunded to the customer, attached to the refund transaction as follows: 

1. Press Split Attach on the refund transaction
2. Press 'Attach / Match document'
3. Select Credit Memo
4. Confirm selection
5. Done

Please note that it is the user's responsibility to ensure that all invoices and credit notes issued to customers are compliant with HMRC’s rules on the issuance of invoices and credit notes. For more information, and to familiarise yourself with the latest advice, please refer to the government’s website.