Advance Payments

Advance payments let you pay a supplier before goods or services are delivered. This is common for large orders, custom manufacturing, or when a supplier requires upfront payment as a condition of the Purchase Order.

When to Use Advance Payments

You would create an advance payment when:

• A supplier's terms require partial or full payment before delivery.
• Your organization wants to secure a commitment for a high-value order.
• The Purchase Order specifies a milestone-based payment schedule (e.g., 30% upfront, 70% on delivery).

How Advance Payments Work

The advance payment process follows these steps:

1. Create a Purchase Order with the agreed terms. The PO total represents the full order value.
2. Record the advance payment by creating a Payment Entry against the Purchase Order. You specify the amount being paid in advance.
3. Goods are delivered. You create a Goods Receipt Note (GRN) when materials arrive.
4. Supplier sends the final invoice. You create a Purchase Invoice for the full amount.
5. Adjust the advance. When you create the final payment against the Purchase Invoice, the advance already paid is automatically deducted. You only pay the remaining balance.

Step-by-Step: Create an Advance Payment

1. Open the submitted Purchase Order you want to pay against.
2. Click Create > Payment Entry.
3. PayInvoice Next creates a draft Payment Entry linked to the PO.
4. In the Paid Amount field, enter the advance amount (e.g., ₹50,000 for a 30% advance on a ₹1,66,667 order).
5. Select the Payment Mode (bank transfer, cheque, etc.) and enter the reference details.
6. The Payment Type is set to "Pay" (outgoing payment to supplier).
7. Review the accounting details — PayInvoice Next debits the Advance to Suppliers account and credits your Bank account.
8. Click Save, then Submit.

TIP

The advance amount appears as an outstanding advance on the supplier's account. You can view all unreconciled advances from the supplier's record.

How the Advance Is Recovered on the Final Invoice

When the final Purchase Invoice is submitted and you create a payment against it:

1. Open the submitted Purchase Invoice.
2. Click Create > Payment Entry.
3. PayInvoice Next shows the full invoice amount in the Paid Amount field.
4. In the Advance Payments section, the system lists all unreconciled advances for this supplier. Tick the relevant advance entry.
5. The allocated advance amount is deducted from the payment. For example, if the invoice is ₹1,66,667 and you already paid ₹50,000 as advance, the payment due is ₹1,16,667.
6. Click Save, then Submit.

The advance is now fully reconciled. The supplier's outstanding balance returns to zero.

Accounting Impact

Stage	Debit	Credit
Advance paid	Advance to Suppliers	Bank
Invoice submitted	Expense / Stock	Accounts Payable
Final payment (with advance adjustment)	Accounts Payable	Bank + Advance to Suppliers

The advance account acts as a temporary holding account. It is cleared when the advance is allocated against the invoice.

SAP Integration

When SAP Integration is active, advance payments sync to SAP along with other payment data. The payment status on the Purchase Invoice reflects updates from SAP, so you can track whether the advance and final payment have been posted in SAP.

INFO

For details on how payment data flows between PayInvoice Next and SAP, see SAP Integration.

Related Pages

• Payment Entry — Full guide to recording payments
• Purchase Order — Creating POs with advance payment terms
• SAP Integration — How sync works for payments