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Purchases & Procurement

Paying a bill from the vendor advance (balance allocation)

Use a vendor's existing credit (advance balance) to settle all or part of a bill without taking new money.

Jul 11, 2026
howtobillspaymentsbalance-allocationvendor-advance

What this does

If a vendor has prepaid (paid an advance) or has a credit balance in your system, you can use that balance to pay a bill instead of receiving new money. This is useful when a vendor wants to use their existing credit rather than sending more cash.

Before you start

  • You have a bill to pay.
  • The vendor has an existing balance or advance credit in the system.
  • You have permission to record payments and allocate balances.

Steps

  1. Open Bills and find the bill you want to pay. Open Bills

  2. Click the Pay button to open the payment drawer.

  3. In the payment drawer, look for a Balance Allocation or Use Vendor Advance option (the exact label may vary).

  4. If available, you will see:

    • The vendor's available balance (the advance or credit they have).
    • An option to allocate (use) part or all of this balance toward the bill.

  5. Enter the amount you want to allocate:

    • To pay the entire bill from the advance: use the full outstanding bill amount (if the vendor has enough balance).
    • To use only part of the advance: enter a smaller amount and pay the remainder another way.

  6. Click Save or Apply Allocation. The payment will be recorded using the vendor's balance, and the bill balance and vendor balance will both update.

Accounting impact

When you allocate a vendor balance to a bill:

  • The bill payable is reduced by the allocation amount.
  • The vendor's advance/balance is reduced by the same amount.
  • No new cash is received; the transaction is internal (vendor credit offsets your payable).
  • Both the bill and the vendor account reflect the new balances.

Tips & common mistakes

  • Check the vendor's balance first: Open the vendor's contact card to see if they have a balance available. If the balance is zero, you cannot allocate it.
  • Partial allocation: You can allocate only part of the vendor's balance to one bill and save the rest for future bills.
  • Do not confuse with a discount: A balance allocation is not a discount; it is using money the vendor already owed you or that you already paid them.
  • Verify the date: If you are settling bills from different months, make sure the transaction date is correct for accounting purposes.

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