Overpayments

You may experience a situation where you have received a payment from a client which is greater than the amount of the bill they are paying; this is referred to as an overpayment.

Listed below are some common scenarios, and how to resolve them:

When a client makes an overpayment, any of the amount not allocated against a bill remains in the Unallocated area on the Debtors Ledger in the Receipt mode.

Summary of Scenarios

Entering receipts against client bills.
Entering an adjustment to a Debtors Ledger.
Allocating unallocated receipts to a bill.
Unallocating receipts allocated to incorrect bills.
Adding a miscellaneous charge during billing.
Transferring funds to a related client.

Scenario 1

In cases where:

you notice an overpayment on the account
the accounting period in which the receipt was entered is still open, and
you want to increase the invoice/bill amount to absorb the overpayment.

This requires you to unallocate any cash and then process a negative adjustment to increase the invoice amount. Then you can fully allocate the payment.

To handle the overpayment

Open the Debtors Ledger for the client.
Select Show Zero at the bottom of the window to view allocated transactions. Transactions with a zero balance are included in the list.
Select the cash in the debtors ledger and select Unallocate. The Unallocated Cash Tax Rate window appears.

You need to complete this step as adjustments can only be entered against an invoice that's not fully paid.
Select the relevant Tax Rate.
Click OK. The receipt is unallocated.
On the Tasks bar, select Adjustment. The Mode changes to Adjustment.
Enter the Date of the adjustment.
Enter the Invoice number into the Receipt Number field.
Enter a Description.
Select the invoice and enter a negative adjustment Amount to increase the bill amount to match that of the receipt.

Adjustments are normally entered as a positive amount which then reduces/credits the gross unpaid amount on an invoice/bill. Since we want to increase the amount of the bill (debit it), you enter the adjustment amount as a negative amount, e.g., -25.00.
Press Tab and confirm the Gross Unpaid amount for the invoice has increased to include the adjustment entered.
Click Post to post the adjustment. A Posting confirmation message appears.
Click Yes to save your changes and update the system.
On the Tasks bar, select Ledger. The Mode changes to Ledger.
To make it easier to see unpaid and unallocated transactions only, deselect Show Zero.
Click on the receipt Amount.
Press and hold Ctrl and click the bill you want to allocate the receipt against.
Click Allocate. The receipt is allocated to the bill.

Scenario 2

There are 2 solutions in cases where you notice an overpayment on the account or a credit debtor balance, and the accounting period in which the receipt was entered is now closed.

You may require partner permission to re-open accounting periods back to the date of the original receipt. If you re-open a period, you won't affect the closing balances for debtors for that month if you are only unallocating entries. But you shouldn't use this process if your firm is using general ledger integration to MAS (AE sites only).

To handle the overpayment on the account (or a credit debit balance) when you have a partner's permission to re-open a period

See KB 34381: To re-open an accounting period to re-open accounting period(s) back to the date of the original receipt.
Once the accounting periods have been re-opened, open the Debtors Ledger for the client.
Select Show Zero at the bottom of the window to view allocated all transactions for the past year. Transactions with a zero balance are included in the list.
Highlight the cash/receipt entry in the debtors ledger and select Unallocate. The Unallocated Cash Tax Rate window appears.
Select the relevant Tax Rate.
Click OK. The receipt is unallocated.
Close the relevant accounting periods. See Editing and deleting accounting periods > AE/AO: To close an accounting period
Open the Debtors Ledger.
On the Tasks bar, select Adjustment. The Mode changes to Adjustment.
Enter the Date of the adjustment.
Enter the Invoice number into the Receipt Number field.
Enter a Description.
Select the invoice and enter a negative adjustment Amount to increase the bill amount to match that of the receipt.

Adjustments are normally entered as a positive amount, which then reduces/credits the gross unpaid amount on an invoice/bill. Since we want to increase the amount of the bill (debit it), you enter the adjustment amount as a negative amount e.g, -25.00.
Press Tab and confirm the Gross Unpaid amount for the invoice has increased to include the adjustment entered.
Click Post. A Posting confirmation message is displayed.
Click Yes to save your changes and update the system.
On the Tasks bar, select Ledger. The Mode changes to Ledger.
Click the unallocated receipt.
Press and hold Ctrl and click on the bill you want to allocate the receipt against.
Click Allocate. The receipt is allocated to the bill.

To handle the overpayment on the account (or a credit debtor balance) when the accounting period is closed and you do not have permission to re-open the accounting periods

Create and post a miscellaneous charge bill via the Billing Wizard for the net amount of the receipt (or credit amount). See To add a miscellaneous charge during billing.
Open the Debtors Ledger for the client.
Select the unallocated receipt.
Press Ctrl and select the miscellaneous charge bill/invoice to allocate the receipt against. The receipt and invoice are highlighted.
Click Allocate. The receipt is allocated to the bill.

Scenario 3

In cases where you notice an overpayment or credit debtor balance on the account and you're going to refund the money to the client.

This requires you to enter a negative receipt against the client and then allocate the entry against the original cash receipt with the unallocated amount.

To handle the overpayment

In Practice Manager, from the Debtors drop-down, select Debtor Receipts. The Company and Bank Account details will default automatically(AO).
Select the Source of the payment.
Open the client.
Enter a Receipt Number.

Enter the original bill number to assist with sorting ledger data and reporting.
Enter a Description. For example, refund overpayment to client.
Enter the Amount of the excess funds received from the client as a negative amount, e.g. -120.00.
Click Post. The prompt Posting will commit these transactions PERMANENTLY. Do you wish to continue? appears.
Click Yes.
On the Tasks bar, select Ledger. Ledger mode appears.
Click on the unallocated negative receipt.
Press and hold Ctrl and click on the original receipt with the excess funds.
Click Allocate. Both receipts are now allocated.
Draw a cheque for the amount for the client or arrange for the funds to be credited into the client's bank account.

Scenario 4

In cases where you notice an overpayment on the account and you're going to allocate it against a future bill for the client.

This requires you to enter a bill that you would normally process for your client and once posted, allocate the excess funds against it.

To handle the overpayment

Enter the receipt, leaving unallocated cash/credit amount.
Once the next bill has been posted:
1. Open the Debtors Ledger for the client.
2. Select the unallocated receipt.
3. Press Ctrl and highlight the bill/invoice to allocate the receipt against. The receipt and invoice are highlighted.
4. Click Allocate. The receipt is allocated to the bill.

Scenario 5

In cases where the overpayment is to be transferred to a related client.

This requires you to:

enter a negative receipt in the current accounting period against the client with the excess funds
allocate the entries, and
enter a positive receipt to the related client using the same date.

To handle the overpayment

In Practice Manager, from the Debtors drop-down, select Debtor Receipts. The Company and Bank Account details will default automatically (AO).
Select the Source of the payment.
Open the client.
Enter a Receipt Number.

Enter the original bill number to assist with sorting ledger data and reporting.
Enter a Description. For example, transfer overpayment to client xxx.
Enter the Amount of the excess funds received from the client as a negative amount, e.g. -120.00.
Click Post. The prompt Posting will commit these transactions PERMANENTLY. Do you wish to continue? appears.
Click Yes.
On the Tasks bar, select Ledger. Ledger mode appears.
Open the same client.
Click on the unallocated negative receipt.
Press and hold Ctrl and click on the original receipt with the excess funds.
Click Allocate. Both receipts are now allocated.
On the Tasks bar, select Receipt. Receipt mode appears.
Select the Client you want to transfer the funds to by either typing in the client name or code or select the magnifying glass to search for the client.
Select the Source of the payment.
Open the Client.
Enter a Receipt Number.

Enter the original bill number to assist with sorting ledger data and reporting.
Enter a Description. For example, transfer of excess funds from client.
Enter the Amount of the excess funds received from the client as a positive amount, e.g. 120.00.
If there's an invoice transaction to allocate to, allocate the receipt against the necessary invoices by entering the amount in the Allocate column.

If the receipt is being allocated to a single invoice, double-click in the Allocate column for that invoice to enter the amount automatically.
Click Post. The prompt Posting will commit these transactions PERMANENTLY. Do you wish to continue? appears.
Click Yes.