Underpayments and overpayments

Occasionally a customer may over or underpay, or you may over or underpay a vendor, leaving a balance on the account. There are numerous reasons why this might happen, and you'll need to decide what you want to do in each different case.

Please consult your accountant before writing off account balances, particularly accounts receivables (debtors) balances.

Note: Manually entered (JJ) journals cannot be assigned to a contact, and therefore cannot be used to write-off accounts receivable (debtors) or accounts payable (creditors) balances.

Underpayments

An underpayment is where a customer doesn't send enough money to cover the total amount of the order or invoice(s) they are paying.

The remaining balance might be an amount that they will pay later, in which case it can be left outstanding on their account, or it might never be paid, in which case it is likely that you will want to write it off in order to balance the account.

Small balance write-offs can be made one contact at a time - Brightpearl doesn't currently have an automated small balance write-off process. The write-off of a contact balance can be made by either:

Overpayments

An overpayment is where a customer has sent more money than is needed to cover the total amount of the order or invoice(s) they are paying.

Entering more than the invoice value on the payment allocation screen will create an on-account amount with the reference ovr_[Invoice reference]:

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The remaining balance might be an amount that they can use later on a future purchase, in which case it can be left outstanding on their account, or it might be refunded to the customer.

However if the credit is never taken, it is likely that you will want to write it off in order to balance the account. Please check with your accountant before writing balances off.

In exactly the same way as writing off an under-payment, the write-off of a small customer balance can be made by either:

Automatic overpayment journals

If the payment amount is greater than the invoice amount, Brightpearl will perform an automatic correction in order to move the overpaid amount onto account. It will differ slightly depending on whether the payment is applied before or after an order is invoiced.

If it's applied before invoicing, then on invoicing an "adjustment entry" will be posted. This adjustment entry will debit and credit the accounts receivable or accounts payable code for the value of the overpayment, so there's no net impact on the account balance.

The difference comes from the invoice reference against each row. One row will retain the original invoice reference, while the other will have an invoice reference of ovr_[invoice reference]. The journal tells the system to reduce the paid amount allocated to the invoice and put it on account instead.

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If it's applied after invoicing, the adjustment occurs in the payment journal itself. Instead of one row posting to the accounts receivable or accounts payable code, there are two which add up to the total paid amount.

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How to fix an allocated overpayment error

Occasionally you will come across an overpayment error on a contact account where a line is highlighted in red and a message about an overpayment appears.

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This error occurs when the payment amount allocated to an invoice is higher than the invoice value. It can happen if journals are manually edited, if the automatic overpayment journal was canceled, or if there has been some kind of posting error causing the automatic overpayment journal not to post at all.

To correct the error, the overpaid amount can simply be allocated to another transaction:

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Or the overpaid amount can be refunded, then a payment on account can be entered using the same bank account.

The adjustments column

Use these steps when a payment doesn't match the invoice amount, but the balance needs to be cleared from the account. This can occur due to an underpayment or an underpayment.

  1. Search for the contact
  2. Open the contact record and navigate to the payment allocation screen via the financials box on the right-hand side
  3. Enter the amount paid against the relevant invoice(s)
  4. Enter the difference between the invoice and payment amount into the Adjustment field
  5. Choose the adjustment account (accounts appear in this list if they have "Allocate discounts to this account?" set to "Yes" in the chart of accounts)
  6. Click the Submit button

This invoice of £200 has had £199 paid by the customer into the current bank account, and the £1 difference written off against the bad debts account:

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You may wish to use a different "payment adjustments" account, and reserve the bad debts account for writing off complete invoices.

FAQs

What is the difference between using an adjustment and a quick invoice/credit?

Both methods will write the balance off, but using an invoice or a credit will also account for tax, while using the adjustment column will result in a non-taxable write-off.

Please consult your accountant before deciding which method to use.

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