Prepayment: Difference between Temporary and Permanent Prepayments

A prepayment is a type of invoice you enter to pay an advance payment for to a supplier or employee. For example, you may need to pay a deposit on a lease, or you may need to pay an employee an advance for travel expenses. You can later apply the prepayment to one or more invoices or expense reports you receive from the supplier or employee to offset the amount paid to them.

You can enter either a Temporary or a Permanent type prepayment.  

Temporary prepayments can be applied to invoices or expense reports you receive. For example, you use a Temporary prepayment to pay a hotel a catering deposit. When the hotel's invoice arrives, apply the prepayment to the invoice to reduce the amount you pay. 

Permanent prepayments cannot be applied to invoices. For example, you use a Permanent prepayment to pay a lease deposit for which you do not expect to be invoiced.

If you want to apply a prepayment to one or more invoices or expense reports, you must first approve and pay the prepayment. You control when a prepayment is available by the Settlement Date you enter and by optionally applying a hold to the prepayment.
When you enter an invoice for a supplier for whom you have outstanding Temporary prepayments, Payables notifies you that you have prepayments available that you can optionally apply. You can also review the Prepayment Status Report to check the status of all prepayments in your system.

To apply a prepayment:
Go to "actions" then "Apply or unapply prepayment"

For the invoice:i) Invoices window: Prepaid Amount; Status is updated to reflect that the invoice has been paid or partially paid
ii) Distributions window: Prepayment Number; Prepayment Distribution
 
For the prepayment:i) Invoices window: If you have applied all Item distributions, the invoice Status will change from Available to Fully Applied
ii) Distributions window: Prepay Amt Remaining

important points:
  • A prepayment needs to be paid fully,
  • A prepayment can be applied on the invoice type is Standard, Mixed, or Expense Report.
  • For applying Permanent type prepayment, it needs to be changed to temporary type.
  • A prepayment must be fully paid before applying it to an invoice.
     

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