How to Record an Advance Payment in ERPNext for Customer/Supplier

In business, payment preferences vary, with some customers opting for immediate cash payments, others making partial down payments with the remainder on credit terms after a specified period, and some choosing to pay in advance.

ERPNext provides the capability to efficiently handle and generate advance payments for both suppliers and customers. This functionality enables the creation of a payment entry record for a specific contact within the system. During invoicing, this advance payment can be selected and applied to proceed with the invoice against a corresponding sale order.

Let us see how we can manage advance payment in ERPNext:

Navigate to the accounting > accounts receivable > Payment entry

Features:

• Payment Type: Choose a payment type, selecting from options like Receiver, Pay, or Internal Transfer.
• Posting Date: Specify the posting date for the advance payment.
• Company: Select the company associated with this payment.
• Mode of Payment: Specify the mode of payment, such as cash, cheque, bank, or create a new mode of payment for classification purposes.
• Party Type: Indicate the party type, whether it's a customer, shareholder, employee, or supplier.
• Party: Record the payment entry for a specific party.
• Party Name: The party name is automatically fetched based on the selected party.
• Company Bank Account: Select the company's bank account.
• Party Bank Account: Choose the party’s bank account.
• Party Balance: Display the total receivable or payable amount, with paid amounts shown in positive and advance payments represented in negative.
• Account Paid From and Account Paid To: Specify the account to be deducted at the time of payment and the account where the amount will be added.
• Account Balance: Show the total amount balance from the selected account.
• Get Outstanding Invoices/Orders: By clicking on the "Get Outstanding Invoices/Orders" button, a wizard menu appears, allowing selection of invoices/orders based on posting date, due dates, and outstanding amounts, with the option to allocate amounts from greater to lesser.

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How can we Record a Advance Payment against Sale Order:

Navigate to sale orders > create > payment.

By creating a payment we can record an advance payment against this particular sale order.

New payment entry will be created in the draft, and we can submit it.

Now, when we create an invoice we can select the advance payment option from the “payment” tab, and click on get advances received and the advance payment will be fetched and can proceed with the sale invoice.

How can we Record an Advance Payment against Purchase Order:

Navigate to sale orders > create > payment.

From the payment option we can record an advance payment against a purchase order.

The related payment entry will be created in draft so we can save and submit it.

And when we create a purchase invoice we can get the advance entry from the “payment” tab, by clicking on “get advances paid” and we can save and submit the invoice it will be paid.

Hope you find this blog helpful, do share your thoughts in the comment section.

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