Customer overpaid but wants remainder to be held in credit

Accounting
1

Hi,

We raised an invoice for £100+VAT.

Customer paid £180 (appears in bank feed) but wants us to hold the overpayment as credit. How do we do this properly? I have tried to create an invoice for £100+VAT however, it won’t let me save it.

I am guessing I need to create a credit for them somehow for £180 and chew this down. However, I don’t want VAT to be in there as we don’t know until he buys something what the VAT split will be.

2

ignore i have figured it out

3

For anyone else’s future reference - you tag the money in as “payment from a customer” as normal but then select the “pay down multiple invoices” option. Despite the name this option works for any case where the payment amount does not match the exact total of a single invoice - you enter the customer name and it will show you all invoices for that customer, you can assign to zero or more invoices (up to the value of the payment) and anything left over will stay as a prepayment on the client account. Next time you create an invoice for the same customer you would immediately “log payment → apply from credit” to assign the £60 credit as a partial payment on the new invoice (or full payment if it’s less than £60, with the remainder staying as credit to be used the next time round).

What happens VAT-wise depends whether you’re on cash or accrual accounting for VAT. On accrual accounting the VAT return is based just on the invoice dates so you’ll only declare VAT on the amount you actually invoiced. On cash accounting it’s based on the payment dates so when you log the payment and create the credit you’ll need to choose what VAT rate to treat it as. The amount that is assigned to the invoice will be declared as per the net/vat split on that invoice, but if it comes to the end of the quarter and there is still credit unused then that portion will be declared as if it were at the selected VAT rate (i.e. a £60 overpayment set at 20% VAT will be declared as £50 net and £10 VAT). If you later assign that credit to an invoice at a different VAT split then at that point QuickFile will automatically adjust the next return accordingly.

4

from the bank pay off the customer invoice and leave the rest as payment on account.