Business Central prepayments: deposits handled on the order

When Business Central prepayments belong on the order

Custom goods, long lead times, new customers and large overseas purchases all call for money up front. Without the prepayment feature, teams raise a manual invoice or book an unapplied payment. Then they try to remember to net it off when the real invoice goes out.

Prepayments tie the deposit to the order itself. The order shows the percentage required, the amount invoiced and the amount paid. The final invoice drops by the right amount, and nobody calculates it. Sales, warehouse and finance all look at the same record.

Setting up Business Central prepayments

Setup starts in the general posting setup. There, you enter two accounts for each combination in use: one for sales and one for purchases. These are balance sheet accounts. One is a liability for customer deposits. The other is an asset for deposits paid to vendors. Neither is a revenue account.

Next come number series for deposit invoices and credit memos. After that, you can set default rates on a customer or vendor. You can also set them for a combination of item and customer. Then the right deposit shows up on new orders by itself. A person can still override it on a single order or line.

The sales prepayment flow

On a sales order, the user accepts the percentage and posts the deposit invoice. The customer gets an invoice for the deposit. The amount goes to the prepayment liability account. Finance sees the pending payment on the order status too.

When the goods ship, the final invoice lists the full order value. It deducts the prepayment already invoiced. So the customer pays only the balance. If the order changes or ends, a credit memo reverses the deposit on the same order.

Prepayments on purchase orders

The purchase side mirrors sales. You post a prepayment invoice from the purchase order, using the vendor's deposit request. That creates a payable, which the payment journal can pick up in the next run. The amount sits in the purchase prepayments asset account until the vendor invoices the goods.

Buyers and finance see one view of what was paid in advance, order by order. That matters when several shipments are in transit. For foreign suppliers, the deposit and the final invoice may post at different exchange rates. Business Central then calculates the currency gain or loss in the usual way.

Controls and tax for Business Central prepayments

One setting can block shipping or receiving until the deposit invoice is paid in full. That backs your credit policy, so nobody relies on memory. A job queue entry can update pending orders once you apply payment. So the warehouse sees released orders fast.

Tax on deposits differs by place. So we check the treatment with your accountant first. Frequent mistakes include revenue accounts used as prepayment accounts. Others are editing order lines after the deposit invoice. Another is mixing deposits with manual unapplied payments on one customer. We train against each. That is how Business Central prepayments stay clean.

Business Central prepayments questions

Can the prepayment be a fixed amount instead of a percentage?

Yes. On the order lines, you can enter a prepayment amount directly. The system then works out the percentage. This helps when the contract states a deposit figure. You can also set the total for the whole order in the order statistics page. We show your order desk both methods when we set up Business Central prepayments.

Can different lines on one order have different deposits?

Yes. Each line carries its own prepayment percentage. So a custom item can need a deposit while stock items on the same order need none. The prepayment invoice totals whatever the lines call for. The final invoice deducts line by line. That keeps mixed orders accurate, and you need no manual math.

What if the customer changes the order after paying the deposit?

Business Central blocks changes to invoiced prepayment lines that would make the deposit exceed the line. For a real change, post a prepayment credit memo. Then adjust the order and post a new prepayment invoice. We write the steps down for your order desk.

Do prepayments work with partial shipments?

Yes. Each partial invoice deducts a proportional share of the prepayment for the quantity being invoiced. The remainder stays in the prepayment account against the open lines. The last invoice clears whatever is left. So the account returns to zero for that order. We test a partial shipment case when we configure Business Central prepayments.

Is a prepayment invoice the same as recognizing revenue early?

No. A prepayment invoice posts to a balance sheet account, not to revenue. Revenue appears when the final invoice posts. That is why the prepayment accounts must be liability and asset accounts. You must also reconcile them to open orders. We give your accountant a simple reconciliation routine.

Related order and cash pages

Deposits sit between order entry, purchasing and receivables. These pages explain the processes around a prepayment setup, from the first quote to the cash forecast. Read them next if your Business Central prepayments plan touches sales orders, vendor payments or cash planning. Then each step handles the deposit the same way. For the product detail, see Set up prepayments in Business Central.