Handle a customer deposit before invoicing

A customer pays $300 toward a future $1,000 sale. The advance should be recorded once and kept separate from earned sales until the appropriate invoice exists. Applying an existing $300 receipt to that invoice leaves $700 remaining.

Before entering a new deposit

The current payment form blocks a receipt with no invoice allocation. If you see “Enter a payment amount on at least one invoice row.”, the receipt has not been saved. See what to do below. The later application steps are for an existing unapplied receipt, not a workaround for that blocked form.

Choose the right treatment first

What the money represents	Which route to use
An advance toward a future invoice	Use this guide.
Payment for an existing invoice	Record and allocate a customer payment.
An accidental overpayment	Keep only the excess unapplied; apply or refund it.
A refundable security deposit that is not payment for a sale	Agree a separate liability workflow before entering it. Do not assume it should eventually become invoice revenue.
A retainer or amount described as nonrefundable	Check the agreement and what has been earned. The label alone does not determine revenue or tax timing.
Money held in trust or on another party’s behalf	This ordinary sales-advance guide does not establish a trust-accounting workflow.

The steps below assume an ordinary business advance for a future sale. They do not decide when the business has earned revenue or owes sales tax.

Record the money received

First check Payments Received for an existing receipt, including online payments. Do not record the same money twice.

In the current Sales & Receivables → Payments Received → Record Payment form, entering $300 in Amount Received while leaving all Invoices to pay allocations at zero is blocked on save. A displayed Unapplied Amount of $300 is only a form preview; it does not mean a receipt was created.

If no invoice exists, retain the bank reference, receipt date, amount, and customer details, and contact support to confirm the available entry path. Do not create a fictitious invoice or allocate the deposit to an unrelated sale to get past validation. Have your accountant confirm any alternative posting so the receipt is neither omitted nor counted twice.

If a genuine invoice already exists for the money received, use record a customer payment instead.

A successfully saved unapplied receipt is held in a liability account named Unapplied Customer Payments by default. A company may have renamed it. It is not a second sales invoice or an ordinary credit memo.

Apply it to the invoice

Start here only if the original receipt is already saved and has an available unapplied amount.

1. When the sale should be invoiced, create the invoice for the same customer and the full sale: $1,000 in this example.
2. In the invoice’s actions, choose Apply credits.
3. Find the original receipt by Source, Transaction No., and Transaction date. Enter $300 in Credits to apply.
4. Review the application-date controls before submitting, especially if the receipt predates the invoice or belongs to a closed month.
5. Check Amount to credit is $300 and Balance after apply is $700, then choose Apply credits.
6. Confirm the invoice has $700 due and the receipt has $0 unapplied. Applying the deposit does not receive another $300.

Check a cross-month example

These illustrative accrual-basis amounts assume no tax, fees, opening balances, or other transactions, and that the work is earned and invoiced in September.

Event	Cash received so far	Unapplied-payment liability	A/R	Revenue earned so far
August 20: receive the advance	$300	$300	$0	$0
September 10: earn the sale and post the $1,000 invoice, before applying	$300	$300	$1,000	$1,000
September 10: apply the existing $300	$300	$0	$700	$1,000

Compare the August 31 and September 30 Balance Sheets, the customer’s invoice/payment detail, and the relevant Profit and Loss periods. The last two rows do not create new bank receipts. If an invoice is issued before the sale is earned, this example’s revenue timing does not apply; review deferred revenue separately.

Check the cash-basis view separately

For the same no-tax, no-fee service example, Bokeping’s cash-basis report recognizes the applied amount in the application month. This behavior was checked with an isolated test company using an August 20 receipt and September 10 invoice/application.

Profit and Loss basis	August income	September income
Accrual	$0	$1,000
Cash	$0	$300

The $300 bank receipt remains dated August 20 in both cases. The unallocated advance is held separately until applied; changing the report basis does not create a second receipt. Both months’ Trial Balance and Balance Sheet were also checked for balance.

This is Bokeping’s reporting behavior for this specific workflow, not a tax-return rule. Advance-payment tax treatment can differ. Keep the actual receipt date and have your accountant review any tax-reporting adjustments. See cash versus accrual.

Match the bank activity and handle cancellations

Match the incoming bank row to the existing receipt, or to the eventual bank deposit when Undeposited Funds was used. Do not categorize it as another sale.

For money still unapplied, follow refund an unapplied payment. For a sale already invoiced and paid, use credit and refund an invoiced sale. Check the company, customer, prior applications, refunds, and document status if the available credit is missing.