Prepayments occur when a customer has paid an invoice before it has been Synced.
What's a Prepayment?
When a customer pays before you sync, the amount will be received as a prepayment as the invoice does not yet exist in your Accounting Package. When the prepayment funds are received, a Prepayment invoice will be created in your Accounting Package that can be applied to the invoice when it is eventually synced.
The Prepayments appear as a record in the Accounts Receivable and are applied in much the same way as a Credit Note is.
How do I handle them?
How to handle Prepayments
When you sync a Prepayment, it will be treated as a standard payment when syncing to ConnectWise. Funds for this prepayment should not go to your Clearing Account. Prepayment settlements are set to go directly to your Bank Account and the invoice transactions to your Deferred Revenue Account.
Deferred Revenue is not yet revenue. It is an amount that you have received in advance of earning it. The amount unearned (and therefore deferred) as of the date of the financial statement should be reported as a liability. The title of the liability account might be Unearned Revenue or Deferred Revenue or Income in Advance. The recipient of a prepayment records unearned revenue as a liability on the balance sheet. This is because it refers to revenue that has not yet been earned, but represents products or services that are owed to a customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.
We recommend that your create a separate revenue account for Wise-Pay Prepayments and place it on the "Dashboard" so that you can keep tabs on it. This will also help to separate other down payments you may be receiving. Bank Transaction (IP Deposit - from Payrix) will require reconciliation against any Prepayment first, then manually reconcile any other payments that would be included with that deposit.
We also recommend the following:
Set up a Liability Account
Go to Wise-Pay Account Merchant details then change the account to the newly created Prepayments Liability Account
Name it as 'Wise-Pay Prepayments'.
(This will also help to separate other down payments you may be receiving.)
Place the Account on your Accounting Dashboard
- Remember to sync frequently, as this will help create less Prepayments.
- For ConnectWise Partners, when you enable our new Real-Time Sync feature, invoices will always be synced as soon as they are closed, thus avoiding your customers paying an invoice before it's synced!
- For our Autotask Partners or ConnectWise Partners who have not yet enabled Real-Time Sync, emailing invoices to your customers after you sync them would be considered best practice.