Overview

When a vendor requires a deposit (in part or in whole) for materials before an order can be made, the system can automatically generate this AP bill and remember which PO it belongs to when the actual bill is being paid. There are a couple of situations that qualify as vendor deposits: one, when you pay for part of the cost of materials before taking possession, and two when you pay for the whole cost of the materials before taking possession. The most important point for whether something is a vendor deposit is the act of paying ahead of time for material that has no acknowledgment, no actual bill and you haven't taken possession of goods. The grey area there is when a staff member calls the vendor and "orders" the material and has to pay for the material at that moment. Although we think of these materials as "ordered" they are not. The vendor takes your money as a deposit first, giving you an order# and then begins the process of "ordering" the requested material. In a credit line ordering process, it works differently. In a credit line ordering process, you call the vendor, place materials on order, get a conf#, and exchange no money. The vendor begins the process of "ordering" the requested material, ships the goods, and then sends you a bill to pay later. This conventional way is not a deposit. So, to reflect your process properly in the job and the financials, you need to process this upfront payment of materials (in part or in whole) as a vendor deposit. to

Setup Process

Prerequisite:   The Admin > Defaults > General defaults must be set for Auto Creation of Vendor Bills from PO's.

Step 1:   Make sure you have a general ledger account for vendor prepaid deposits. This is usually an asset account:

Step 2:   Map the vendor prepaid deposit ledger account in the Admin>Store Info area as the default GL account for that store location:

Process Procedures

Step 1:   On the PO that you need a deposit payment, click the “Deposit” button on the top tool bar:

Step 2:   Once the system confirms that the deposit payable was generated, navigate to payables and locate the payable to the vendor that displays the PREPAID DEPOSIT GL in the “Acct ID” field (it is usually the second payable in the found set if you navigate directly from the PO):

Step 3:   Enter the Posting Date, Invoice Date and then the deposit amount in the Bill Amount field. Use the quick pay button to pay the deposit to the vendor. The payment can be made by check or credit card. If paying by credit card, you would select the appropriate credit card account in the bills due area.

Step 4:  When the actual bill arrives for the material, verify the material as usual. When you accept the verified bill, the system will prompt you to confirm you want to apply the deposit to this bill. Select YES so that the system will make the appropriate postings and reduce what is owed on the bill:

Step 5:   When the payment is made for the remaining amount, the bills due area reflects the deposit payment.

Summary

The result of this new process is that the appropriate postings are made automatically in and out of the prepaid deposit GL. Users no longer need to do this process manually.

This feature remembers which purchase orders already have prepaid deposits and prompts the user to use these against the full bill so that no deposit is forgotten or not used.

Financial Implications

Financially, the deposit payment is going into the vendor prepaid asset account at the time the payable for the deposit is made and it comes back out once the actual bill has been verified and accepted.

It is possible that the deposit payment can happen in one fiscal period and the acceptance of the actual bill can happen in the following fiscal period. Pay attention to posting dates at the payable to keep your postings in the appropriate fiscal periods.