What are Pre-Payments in Xero and how do I handle them?

Applies to: Xero 

If you would prefer to watch a video on how to handle your prepayments, watch the following Webinar:

Wise-Pay Best Practices - Prepayments

Wise-Pay pre-payments occur when we receive money from a client but do not have an invoice to match the payment.When this happens, Wise-Pay will automatically create a prepayment in Xero for this amount against the nominated bank account.

How are Prepayments posted in Xero?

The Wise-Pay Prepayment account is a Current Liability Account:

It will appear in your Bank Account Transactions as a Prepayment - Unreconciled:

And on the Dashboard against Wise-Pay Prepayments:

What do I do?

Locate the client in Xero

You will need to locate the client in Xero, and verify if the Invoice has now, subsequently been received for payment:

 Allocate Credit to Invoice 

Note:

The Wise-Pay Prepayment account should balance to $0.00. To ensure that a client's payments are applied appropriately, we should be aiming for the Prepayment account to return to $0.00 as quickly as possible.

 Reconcile the payment in the Bank Statement 
When the IntegraPay Batch Payment is received to your bank account, it will generally be a total of both Prepayments and Wise-Pay Clearing transactions.

Here's how to do it:

  1. Select: "Find & Match" and search for PP_

    Note:The total amount is not likely to equal the amount received from IntegraPay

  2. Select the Prepayment Transaction
  3. Add a new transaction for the remaining amoun as a direct payment

    Note:Once this transaction has been saved, the total amount received should match with the transactions for prepayment and Wise-Pay Clearing - you should be able to complete the reconciliation.

  4. Complete the Reconciliation

    The original Account Transaction will now be showing as reconciled.

Important:

Prepayments should not be processed in the same way as Overpayments. Read more about overpayments at What are Overpayments in Xero.

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