Have you ever had a client overpay an invoice? In this situation, you have two options: you can refund them the difference, or you can apply that overpayment towards future services. If you want to apply those funds to future invoices, how you bookkeep that will depend on several factors. We’ll break it down below.
My client paid me an intentional deposit
If you provide your client with ongoing services and invoice them on a regular schedule, your client may choose to pay several invoices in advance.
The easiest way to reflect this is by splitting the payment to record it against future invoices. If you’d planned to invoice your client $1000 per month from April to June, for example, but your client has paid you the $3,000 up front in April, the first step is to make sure you’ve created the three invoices, one for April, May, and June.
When the payment is recorded, or imported from your your bank connection, split the payment into three and record each split transaction against the related invoice.
If this situation seems familiar, you might want to consider using Wave Checkout, which allows you to offer a package of services to your clients through an easy link.
My client overpaid me and they don't want a refund
You sent your client a $900 invoice and they paid you $1,000. Now you have $900 as the invoice payment and $100 you need to account for.
- Under Chart of Accounts, create a loan and line of credit account called "customer deposit" or "customer overpayment." You'll use this as a holding account for the overpayment until you can apply those funds to a future invoice for this client.
- On the Transactions page, add $1,000 in income to the bank account where you received payment. (If you have your bank account connected to Wave and this transaction was imported, you can skip this step).
Split the transaction and designate $900 as payment to the related invoice. The invoice will now be marked as paid in full.
Assign the remaining $100 to the customer overpayment liability account you’ve just created. This indicates that you’re holding this money on behalf of your client, to apply against future services, which is the most accurate way to bookkeep this situation.
The next time you need to invoice that client, you'd create the invoice as normal, and then indicate a partial payment against it from the customer overpayment account before sending the invoice to your client.
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