What is a Prepayment?
Prepayments occur when a customer has paid an invoice before it has been synced. Alternatively, you are able to take a prepayment on a customer's behalf via Wise-Pay or via a Quicklink/Virtual Terminal.
When a customer pays before you sync, the amount will be received as a prepayment as the invoice does not yet exist in Xero. The same goes for prepayments you take on a payers behalf - the money received is in lieu of an invoice.
Once the invoice is synced, you can easily allocate the prepayment funds to the Invoice.
How do I handle Prepayments?
When a prepayment is made, the following happens:
- A Xero Credit Note will be created in Wise-Pay and in Xero for the payment received from your customer.
Note: in Xero, a draft credit note is created for bank/ACH payments which is then approved once the payment has been approved. If the payment fails, the credit note is removed from Xero. For bank payment failures, payment against the credit note can be retried from within Wise-Pay. - A Prepayment Invoice is created in Xero.
- Both invoices are created with the reference 'PF'.
- Once the Invoice is created in your PSA and then synced to Xero, you need to manually apply the credit to the invoice. This needs to be done in your Accounting Package.
- To apply the credit to the invoice, open the Prepayment Credit Note (prefix PF_CR'), click Credit Note Options > Allocate Credit:
- Select the Invoice to apply the credit to and click Allocate Credit:
- The credit note and invoice are matched off, and the payment is against the Prepayment Invoice:
- To apply the credit to the invoice, open the Prepayment Credit Note (prefix PF_CR'), click Credit Note Options > Allocate Credit:
- Once you have applied the credit to the invoice in Xero manually run a Payment Sync in Wise-Sync to update the payment status in Manage
- If you need help with allocating credits in Xero, this Xero article should be of assistance.
Wise-Pay Prepayment Settings
In your Wise-Pay Merchant Configuration, you need to set the following:
- Account for Clearing Payments: Wise-Pay Clearing Account
- Overpayment Tax Code: The 0% (i.e. 'BAS excluded' / 'No Tax' / 'Tax Exempt') tax code from Xero
Important Note:
- 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.