An advance payment is used when your business receives money from a customer before delivering a product or providing a service. This is a common practice across industries like design, construction, and consulting, and it may be subject to specific accounting and tax regulations.
This guide walks you through how to properly record a customer advance payment in Wafeq, along with the related scenarios, step by step.
Recording a Customer Advance Payment
When you receive a payment from a customer before issuing an invoice, we use a "Payment" to record the transaction.
To record a customer advance payment, click on "Sales" from the main menu, then click on "Customer Payments", and click the arrow next to the "Record Payment" button, then choose "Invoice Payment / Advance" from the dropdown list.
A new customer payment will appear, Fill in the details as follows:
Customer: Select the customer’s name
Paid Through: Choose the bank or cash account that received the payment
Payment Currency: You can select the currency in which the customer made the payment.
Amount Received: Enter the payment amount
Date: Enter the date the payment was received
Once done, click the "Record" button.
Wafeq will automatically generate a credit note linked to this advance, which can later be applied to the customer’s future invoices.
Applying the Advance Payment to a Sales Invoice
To pay the invoice using the credit note generated from the advance payment
Click on "Sales" from the main menu, then click on "Invoices".
Make sure the view is set to "table" view, then click on the invoice you need to pay ensuring it belongs to the same customer.
From the invoice screen, click on "Apply Credit Note".
A pop-up window will appear showing the available credit balance.
Verify the amount you want to apply from the credit note, whether to pay the invoice partially or fully.
The credit note will be applied directly to the invoice.
The system will automatically update the invoice status and the remaining balance.
Recording a Customer Advance via a Cash Invoice (When Tax applied)
In certain cases, businesses may need to issue an official invoice when collecting an advance payment especially when there are tax requirements, such as:
The customer requests a tax invoice for the advance amount.
Legal obligations require issuing an invoice upon receiving any payment, even before delivering the service.
In this scenario, we record the customer’s payment through a Sales Invoice, linking the item to a dedicated account called Customer Advances.
Step 1: Make sure the "Customer Advances" account exists
Before creating the invoice, ensure you have an account named "Customer Advances" in your chart of accounts, listed under "Liabilities".
To check this:
Click on "For Accountant" from the main menu, then click on "Chart of Accounts".
Under the Liabilities section, look for an account named Customer Advances.
Make sure the account is active and ready to use.
If the account doesn’t exist, you can create it by clicking the "Add +" button next to Current Liabilities, then selecting "Add Sub-account".
For more details on how to add a sub-account, refer to this guide.
Step 2: Creating a Cash Invoice for the Advance Payment
To record the cash invoice that documents the advance payment along with VAT.
Click on "Sales" from the main menu, then select "Cash Invoices", and click the "Create" button.
A new cash invoice screen will appear, Fill in the details as follows:
Paid through: Select the bank or cash account that received the payment.
Customer: Choose the customer who made the payment.
Date: Enter the invoice date.
Description: For example, Advance Payment.
Account: Select the Customer Advances account.
Quantity: If the advance is tied to a specific product, enter the quantity; otherwise, leave it as 1.
Price: Enter the amount of the advance.
Tax: Choose the applicable VAT rate.
Tax Exclusive/Inclusive: Click to specify whether the tax is included in the invoice total or added on top.
After entering all details, click the "Finalize" button at the top of the screen to save and finalize the invoice.
Deducting the Advance Payment from the Final Sales Invoice
After delivering the product or service, you’ll need to issue the final sales invoice that reflects the full value of what was provided. Since the customer has already paid part of the amount as an advance, you must deduct that advance from the invoice so only the remaining amount appears as due.
Click on "Sales" from the main menu, then select "Invoices", and click the "Create" button.
List the following two line items in the invoice:
First line item: Represents the full value of the product or service, and should be linked to the "Sales" account.
Second line item: A negative value linked to the "Customer Advances" account, to reflect the previously received advance payment.
Make sure VAT is applied correctly to both line items.
Handling Bank Collection Differences (Transfer Fees)
In some cases, the bank may deduct a transfer fee when receiving a customer's payment, resulting in a lower amount appearing in the bank statement than what was recorded in the advance payment or invoice.
To ensure your bank records match the actual received amount, record the difference as a bank fee while performing the reconciliation.
Example:
If the advance payment was for 1,000 SAR and only 990 SAR was received in the bank, the 10 SAR should be recorded as a bank fee.
To learn how to record these charges during reconciliation, refer to the guide:
Recording Bank Charges During Reconciliation.
Actions available for customer payments:
From the "Customer payments" list, select the required receipt by clicking on it, then click the More (⋮) icon to view the additional available actions for that receipt.
- Save Changes: Use this option to save the payment and record it as an accounting transaction.
- Delete: Remove the customer's advances.
- Print / Download: Generate a PDF version of the customer's advances that you can print or download for offline sharing.
- Attachments: Attach files to the receipt, such as receipts, images, or contracts.
Customer Payments List
You can access the Customer Receipts list by clicking on “Sales” from the main menu, then selecting “Customer Payments” There, you will find several actions you can perform on Customer Advances, such as:
Search bar: Use it to find a specific Customer Advances by entering the customer name or part of it.
All Time: Allows you to select a date range to display data based on the selected period.
Add filter: Use filters to narrow down results by contact, payment account, or currency.
Sorting:You can sort data by date (for example, from oldest to newest or vice versa), alphabetically, or using various other sorting options based on your needs. You can also apply multiple sorting criteria simultaneously, with the ability to easily rearrange the selected options by dragging and moving them. This helps improve data presentation and makes it more organized and easier to browse.
How to Export Customer payment
To export "Customer payment" data, click on the three-dot menu located on the side of the screen. From there, select your preferred export format, such as Excel or CSV. You can then save the file for future use or copy and paste the data wherever needed.
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