Deposits and prepayments

When a customer pays before there is an invoice to pay, record a receipt that pays no invoice, and say what the money is.

Before you start

You need Invoice Edit. Decide what the money is:

• Overpayment — money on account, to allocate to invoices later or refund.
• Prepayment — paid in advance for goods or services not yet invoiced; held like an overpayment.
• Security deposit — a refundable deposit you hold, such as one on loaned items. It is not customer credit and is left out of the account’s balance.

Steps

1. On the account’s Receipts tab, select Record payment.
2. Enter the Amount received, Date, Method and Reference. Tick no invoices or credits.
3. Under The unapplied amount is, choose Overpayment, Prepayment or Security deposit. Nothing is chosen for you.
4. If a Deposit tax invoice section appears, choose the Product for the invoice line and, if the money is for a quotation, pick it under Against quotation (optional); otherwise choose the Tax. Check the total shown.
5. Select Record payment.

What happens next

A prepayment or overpayment stays on the account as Unapplied, ready to allocate or refund. A security deposit shows as Security deposit held on the receipt, and as Security deposits held in a note at the top of the account’s Invoices tab, apart from the balance.

The Deposit tax invoice section appears when your settings under System settings → Tax make tax due on receipt — for a GST-registered company in Singapore, on a prepayment. Saving issues a tax invoice dated the receipt date, pays it with this money, and lists it under Invoices issued with this receipt. Later invoices of the quotation it names deduct it. Without a quotation, reverse it with a credit note when you invoice the work, and apply that credit to the new invoice.

Use a security deposit

Open the receipt and, in its ··· menu, select one of:

• Allocate deposit to invoices — pays issued invoices from it, dated today.
• Invoice from deposit — issues a tax invoice today for the amount you enter, tax included, paid from the deposit.
• Refund security deposit — pays it back as a refund.
• Forfeit security deposit — keeps all or part of it as compensation for the customer’s breach; see Forfeit a security deposit.

Rules to know

• A security deposit needs a receipt of its own.
• Change what it is on the receipt works while none of the money has been allocated on a later day or refunded. It cannot turn a receipt into a prepayment that needs a deposit tax invoice.
• Changing what the money is and using a deposit need Invoice Edit set to All records. A deposit tax invoice also needs Invoice Add, and forfeiting needs the Forfeit security deposits control in your role.
• A receipt that issued a deposit tax invoice is voided only after its payment is removed from that invoice and the invoice is cancelled. A receipt with a forfeiture on it is voided only after the forfeiture is reversed.

Why it works this way

What the money is decides how it is taxed and reported. An advance payment for work is part of a sale; a refundable deposit is money you hold for the customer. Saying which it is when you record it means the receipt, the account balance and any tax invoice all treat it the right way from the start.

A prepayment can be taxed on the day it arrives. Under Singapore GST, payment received before you invoice fixes when tax is due on that part of the sale. The deposit tax invoice records that tax on the receipt date, so your GST return picks it up in the right period. Naming the quotation lets the later invoices deduct it, so the customer is not charged twice.

A security deposit is not the customer’s credit. It is held against something they must return or do, so it stays out of what they owe and out of the ageing. When you refund it, use it as payment or forfeit it, each of those leaves its own record.

A deposit needs a receipt of its own. Keeping it apart from money that pays invoices means its balance, its refund and any forfeiture can always be traced to the one payment that brought it in.

Work faster

• Record it from the account. Record payment on the account’s Receipts tab starts with no invoices ticked, which is what a deposit needs.
• Name the quotation on a prepayment. With Against quotation (optional) set, later invoices of that quotation deduct the deposit for you. See Raise an invoice.
• Use the deposit as payment when the work is done. Allocate deposit to invoices or Invoice from deposit settles the charge without new money moving.
• Correct the type instead of voiding. Change what it is turns an overpayment into a prepayment or back, or either into a security deposit on a receipt that pays no invoice, while none of its money has been used. A security deposit cannot be changed back.
• Check what is held per customer. The note at the top of the account’s Invoices tab totals the security deposits held. See Account details.

Examples

Lim & Co is GST-registered, and its Tax settings say so. On 1 October Harbour Café pays SGD 5,450.00 in advance for half of a SGD 10,000.00 (before tax) fit-out quoted in QN-10000140.

Mei Tan records a receipt on the café’s account with no invoices ticked and chooses Prepayment. The Deposit tax invoice section appears. She chooses a “Deposit” service as the product and QN-10000140 as the quotation. The section shows “At 9%: SGD 5,000.00 + tax (GST) 450.00” and “Invoice total SGD 5,450.00”, because GST on a payment that includes it is 9/109 of it: 5,450.00 × 9 ÷ 109 = 450.00. Saving issues the invoice, dated 1 October and already Paid.

The café also leaves a refundable SGD 2,000.00 deposit for display pieces it borrows. Mei records it on a separate receipt as a Security deposit; no tax invoice is issued, and the account shows Security deposits held SGD 2,000.00. When the pieces come back, she opens that receipt and selects Refund security deposit.

A deposit used to pay for damage. One borrowed piece comes back damaged, and the loan agreement says the café pays for the repair: SGD 300.00 plus GST of SGD 27.00, SGD 327.00 in all. A repair is a service, so Mei does not forfeit anything. She opens the deposit receipt, selects Invoice from deposit, enters 327.00 as the amount to invoice, tax included, chooses the product and GST 9%, and selects Issue invoice. The invoice is issued today and paid from the deposit, which now holds SGD 2,000.00 − SGD 327.00 = SGD 1,673.00. When the other pieces come back, she refunds the SGD 1,673.00.

Common questions

• Should I record a deposit as a prepayment or a security deposit? A prepayment is part of the price, paid early. A security deposit is refundable and held against something the customer must return or do.
• Do I have to issue a tax invoice for a prepayment? Only when your Tax settings make tax due on receipt, as for a GST-registered company in Singapore. The Deposit tax invoice section then appears in the dialog. See GST and tax invoices.
• Is a security deposit part of the customer’s balance? No. It is shown apart, as Security deposits held, and left out of Outstanding and the ageing.
• Can I change a prepayment into an overpayment after recording it? Yes, with Change what it is on the receipt, while none of the money has been allocated on a later day or refunded.
• How do I use a deposit to pay the final invoice? Open the deposit’s receipt and select Allocate deposit to invoices, or Invoice from deposit to issue the invoice and pay it in one step.
• Can a security deposit share a receipt with invoice payments? No. Record it on a receipt of its own, with no invoices or credits ticked.

Related

• Record a payment
• Use unapplied money
• GST and tax invoices
• Forfeit a security deposit
• Deposits and progress claims