Down Payment Invoice Process 
Companies have a business need to issue and receive invoices that include tax (or VAT) for down payments made or received. These invoices are then cleared with partial or final invoices. Companies record a down payment received in SAP Business One by creating a payment not based on an invoice. However, due to legal requirements in certain countries, the recording of a down payment requires an invoice or a billing document.
The process below explains how to create down payment invoices and how to clear them.
For the Czech Republic, Hungary, Poland, and Slovakia, see Down Payment Process: CZ, HU, PL, SK.
Prerequisites
Before you can use down payment invoices, you must do the following:
Define a clearing account on the Sales and Purchase tabs in the G/L Account Determination window in
Administration 
Setup
Financials 
. If you intend to use the down payment invoice only for sales or only for purchases, define the clearing account on the proper tab.Optionally, for each business partner, you can define a special down payment clearing account on the General tab in the Accounting window in
Business Partners
Business Partner Master Data .
Process
Create an A/R or A/P down payment invoice for a relevant business partner. If you create the down payment invoice by drawing a base document, ensure that you have defined the required down payment percentage. For more information, see A/R Down Payment Documents: General Area or A/P Down Payment Documents: General Area.
The down payment invoice:
Creates an accounting posting
Does not affect inventory values or perpetual inventory
Does not change the status of the base document that was drawn into it
Once the actual payment for the down payment invoice is made, create the proper payment document, based on the down payment invoice. A down payment invoice can be paid partially.
After you create the payment document, a journal entry is recorded in the corresponding control account.
NoteIf you cancel the payment created for the down payment by choosing
Data Cancel from within the incoming/outgoing payment, the paid down payment is reopened and cannot be drawn when you create an invoice.However, if, for example, the down payment was paid by check and you cancelled the check from within the check register, then the down payment remains closed and can be drawn when you create an invoice.
End of the note. NoteIf you copy a down payment invoice to a credit memo, the Items per Unit and Unit of Measure fields cannot be edited.
End of the note.Create a regular invoice. Before you add it, click
(Browse) to open the Down Payments to Draw window. Draw the required down payments
from this window and specify the net or gross amount to be copied into the regular invoice.The total amount of the drawn down payments is taken from the Total Down Payment field in the invoice. This amount is deducted from the original total amount of the invoice.
Note
You can pay the down payment invoices and the regular invoices in the same payment document. The down payment documents are labeled as document type DT in the payment document.
Result
The invoice total is updated by subtracting the down payment total from the original invoice total.
A down payment invoice that is drawn to an invoice is closed and cannot be drawn again to another invoice.
Example
The following example illustrates the down payment invoice process in the sales area.
Down Payment Invoice Creation by a Sales Person (United States)
Bass Clef Ltd. uses the non-perpetual inventory method of inventory valuation. Tom, the sales employee, creates Sales Order 875 for Horn & Brass for the following items:
1 Music Score Trumpet Solo |
$60 |
1 Music Score Guitar Solo |
$40 |
1 Music Score Flute Duet |
$100 |
Total |
$200 |
Sales Tax (5%) |
$10 |
Total including Tax |
$210 |
Horn & Brass has decided to pay currently only a deposit of $80. Tom, as a sales employee, does not have authorization to create a down payment invoice, but in SAP Business One Tom can create a deposit (incoming payment) directly from the sales order, so that Down Payment Invoice 431 is created automatically once the payment has been received. At this point, no sales tax is charged.
The journal entry created by the deposit document is:
Debit |
Credit |
|
Cash |
80 |
|
Account Receivables |
80 |
Another journal entry created automatically by Down Payment Invoice 431 is:
Debit |
Credit |
|
Account Receivables |
80 |
|
Payment Advances |
80 |
Tom creates Delivery 589 and the order is shipped. He issues the final invoice for the total sales order. The amount due is only the open amount (the remaining amount to be paid). The revenue reflects the full amount, which creates the following journal entries:
Debit |
Credit |
|
Accounts Receivable |
130 |
|
Payment Advances |
80 |
|
Sales Tax |
10 |
|
Revenue |
200 |
Down Payment Invoice Creation by a Sales Person (United States)
Books & Poems Inc. uses the non-perpetual inventory method of inventory valuation. Anne, the manager, creates Sales Order 361 for the Bloor Street Book Club for the following items:
1 British Novel |
$30 |
1 American Novel |
$45 |
1 Canadian Novel |
$25 |
Total |
$100 |
Sales Tax (5%) |
$5 |
Total including Tax |
$105 |
After two weeks, Anne has not received payment. She creates Down Payment Invoice 232, for which the following journal entry is created:
Debit |
Credit |
|
Accounts Receivables |
40 |
|
Payment Advances |
40 |
The Bloor Street Book Club pays the deposit once they have received the down payment invoice. At this point, no sales tax is charged.
The journal entry created is:
Debit |
Credit |
|
Cash |
40 |
|
Accounts Receivables |
40 |
Anne creates Delivery 870 and the order is shipped. She issues the final invoice, which creates the following journal entries:
Debit |
Credit |
|
Accounts Receivables |
65 |
|
Payment Advances |
45 |
|
Sales Tax |
5 |
|
Revenue |
100 |