In SAP Business one, you can pay invoices in advances on account through the incoming a window. However, in some countries there is a legal requirement for down payments to have an invoice or a billing document.

Another reason why you might want to use the A/R Down payment invoice is that you might want to recognize revenue only after the goods have been delivered or services have been rendered.

Prerequisites

• Define the proper clearing accounts for both sales  in the GL determination tabs.
• You can also define a special clearing account for each business partner in the general tab

Let’s look at a real life example,

NB: For simplicity, we shall not include tax journals in this example:

1. You receive an order from your customer
2. You post a sales order for goods worth 2500 in SAP
3. You need your customer to pay 40% of the value of the order before goods are delivered i.e 1000
4. The customer needs an invoice before they can make the down payment

NB: You only want to recognize revenue at the point you deliver the goods

5. You post a A/R down payment based on the order posted in (2) above.

The journal entry for the A/R down payment invoice will be

Dr. Customer a/c  1000       Cr. Payment advance a/c  1000

6.  You post an incoming payment to pay the down payment invoice

The journal entry for the incoming payment will be

Dr. Bank  1000        Cr. Customer  1000

7. The final stage will be posting the delivery document to deliver the goods to the customer

The journal entry for the delivery will be

Dr. Cost of goods 300       Cr. Stock  300

8. Finally we post the actual invoice

The journal entry for the invoice will be

Dr. Customer 1500            Cr. Sales a/c  2500       Dr. Advance payment 1000

9. When the customer pays the balance, the journal entry will be:

Dr. Bank a/c  1500        Cr. Customer a/c  1500

I am Caroline Ininga Majute,  a SAP Business One Consultant based in Nairobi, Kenya. For more inquires about sap business one, contact me at: [email protected]