The system allows you to easily create a client credit memo invoice from an Advance Bill Invoice that was paid but the accrued value is no longer needed. Ex. You asked for a deposit, but the client has decided to cancel the project.
When creating an Advance Bill, there are 2 parts to this type of invoice:
1) AR: like any other revenue invoice, an Advance Bill needs to be paid, this is tracked via the AR account
2) Accrual: as this is not revenue, the invoice posts the value into an Accrued Advance Bill account to be used for future revenue invoices to offset those revenue invoices AR value.
Due to the above, a credit for an Advance Billing Invoice must also take into account this duality.
The credit created will consist of 2 invoices:
1) Credit Memo: this will create a credit to AR account
2) Accrual Relief: this will relieve the value of the accrued amount of the invoice
The end result of these two invoices is a Debit to AR and a Credit to Advance Bill Accrual
1. From an Advance Bill Invoice that is paid for (Receipts), but not applied to any standard invoices, you can click on the ...more>Create Credit.
2. This will create two invoices:
- Close out Accrual Amount: This invoice will be auto applied to the Advance Bill. When posted it will relieve the Advance Bill Accrual value.
- Credit Memo: This invoice will be used to refund the receipt/paid value of the Advance Bill. It may be used for future client invoices or refunded to the client.
3. Approve and post the above invoices. Prior to posting you are able to edit the invoices if needed. However, it is recommended that the Revenue/Sales account used in both invoices should match.
Example and T-chart
Ex. You ask for a $2000 Advance Bill for the project. The Client pays the invoice in full.
Later, it is decided to cancel the project. This means you will need to credit back the amount the client paid.
1) The Advance Bill is created and sent to the client.
When posted you see the following:
|Adv Bill Accrual||2000|
The client pays $2000 immediately. When posted, you see the following:
The client decides to cancel the project. Because the Advance Bill has been fully paid, you need to open the Advance Bill invoice and click ...more>Create Credit, located on the top right of the screen. This will generate 2 invoices: one invoice will clear the Accrual amount, the other will create a credit memo for future use or refund to the client
When you approve and post both of these invoices, you will see the following
|Default Revenue Acct||-2000|
|Adv Bill Accrual||2000|
|Default Revenue Acct||2000|
As the Credit memo and Accrual relief post to the same default revenue account, the overall affect on Sales/Revenue is 0.
I do not need the Advance Bill
If you created an advance bill by mistake or the client decided to cancel the project all together, but you still have accounted for the advance bill in your financials, you can use the above method. However, you will need to apply the credit memo invoice to the advance bill prior to posting. This will clear the AR amount of the advance bill in the current period.