Recording customer advances

An advance (also called a prepayment) is money a customer pays before you deliver goods or services. Recording an advance creates a balance on the customer's account that can be applied to invoices later.

Before you start

• The customer must exist in your Contacts. If not, create them first.
• You need permission to record payments. Contact your admin if you cannot access the payments page.
• Know the payment amount and the currency if your customer's account uses multi-currency.
• Decide which account to record the advance against (usually a balance or trust account).

Steps

1. Go to Payments → New Payment
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2. Choose Payment type: Advance.

3. In the Contact field, select the customer name.

4. Enter the Amount received.

5. Choose the Currency if applicable (defaults to the customer's preferred currency).

6. Select the Account to receive the advance (this records the debit side of the payment).

7. Add a Note if needed (e.g., "Deposit for order #123").

8. Click Save.

The advance now appears on the customer's balance sheet. When you create an invoice for that customer, you can apply the advance to settle part or all of the invoice amount.

Accounting impact

When you record an advance:

• The receiving account (usually Cash or a Bank account) is debited (money in).
• A Customer Advance Payable or balance liability account is credited (money owed back as credit).

When you later apply the advance to an invoice, the balance liability is debited and the invoice's receivable is credited, clearing the advance.

Tips & common mistakes

• Keep advances separate by currency: if a customer pays in multiple currencies, record each as a separate advance so the system tracks the exchange rate correctly.
• Use a dedicated advance account: create a specific "Customer Advances" account in your chart of accounts to make reconciliation easier.
• Check the balance before allocating: on the customer's contact page, confirm the advance balance matches your records before applying it to an invoice.
• Record fully received money only: do not record an advance unless the customer's payment has cleared your bank. Pending deposits should not yet be recorded.

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