Table of Contents
Purpose
Sometimes your company may require payment before work is performed. This is called a prepayment or deposit. This is also referred to as Unearned Revenue or Deferred Revenue.
Your company may offer a discount to customers who are willing to pay up front for their contract! If this is agreed upon, you can review Option 1 in Aspire’s discount article, found here.
There are many choices on how to handle prepayment. We have listed some basic suggestions, and you might find another option that works best for your organization.
As a best practice, most companies choose to not accept prepayments before an opportunity is created in their Aspire system.
If you need the information on how to handle this, keep reading!
Disclaimer
These are just suggestions on how to handle Prepayments.
Please contact your accounting professional on the best way for your company to record prepayments, as Aspire does not provide accounting advice. Aspire can only recommend use case scenarios with the software.
Requirements
✅In order to add new payments, you would need View Accounts Receivable added to your user role.
✅In order to add tags to properties, you would need either Edit Properties or Edit My Properties to your user role. To edit opportunity tags, you would need to have Edit My Opportunities, or Edit All Opportunities to your user role.
Tracking Prepayments Into Your Accounting System
For both of these options, you can add verbiage in your contract that states the percentage of deposit that is due at time of signing. You will use the contract to collect the prepayment. Doing so will prevent you from creating an invoice for the prepayment.
Recording a Prepayment With Sales Tax Reported
Record your Prepayments to Deferred and Unearned Revenue on your Balance Sheet.
Only record the prepayment in your accounting system.
Debit Cash and Credit Deferred Revenue/Unearned Revenue
Invoice the customer for services performed as needed. To apply the prepayment you’ve received in your accounting system, you’d then process a payment in Aspire.
Once the deposit comes into your accounting system, record a journal entry to reduce the amount in Deferred Revenue/Unearned Revenue.
Debit Deferred Revenue/Unearned Revenue and Credit Cash
Continue with the billing cycle until the prepayment balance is zero for this customer in your accounting system.
Recording a Prepayment Without Sales Tax
Record Prepayments to Deferred Revenue/Unearned Revenue on your Balance Sheet.
Only record the prepayment in your accounting system.
Debit Cash and Credit Deferred Revenue/Unearned Revenue
You will invoice the customer for services performed as needed. To apply the prepayment received in your accounting system, process a Credit Memo in Aspire.
Create a Payment Category called Job Deposits and use the Account Number to the Deferred Revenue/Unearned Revenue from your accounting system.
When you post your Revenue journal entries at EOM the Credit Memo will reduce the amount in Accounts Receivable and Deferred Revenue/Unearned Revenue.
Debit your Deferred Revenue/Unearned Revenue and Credit AR-Aspire System.
Continue for the billing cycle until all the prepayment/deposit is zero for this customer.
📌Note: You may want to create sub-accounts in your deferred revenue account to track customer balances.
📑 To learn more about payment categories, read here.
Tracking Prepayments in Aspire
Invoicing the Entire Amount of the Opportunity in the First Month
Regardless of having Invoiced or Earned Revenue, read below to see some of the options when it comes to accepting Prepayments in Aspire.
For some contract setups, it’s best to invoice the entire opportunity value in the first month. This allows the customer to pay in full upfront and you could then apply the prepayment to their invoice.
Once you've applied the customer payment to the invoice, you can issue a credit memo for the prepaid discount balance and apply it to the invoice balance. This eliminates lingering accounts receivable amounts.
Consider the Pros & Cons of this process:
Pro: Eliminates A/R for the remainder of year and reduces the need for monthly invoicing and customer payment processing.
Con: The over/under report will look like you are overbilled until the end of the contract with this particular customer.
If you are okay with this, then this is manageable and worth trying.
If you are NOT okay with this, you might want to consider the additional options listed below.
Con: With this option you are recognizing revenue before it is earned.
📑 If your client cancels, then you will need to refund your customer. Follow the How to Refund Payments process, here.
Invoicing for your Opportunity Monthly
Another option for accepting prepayments on the property in Aspire would be to win the current opportunity for the full amount. Then, you can apply the payment to the property’s future opportunity invoices.
📌Note: When you choose this option, the A/R Aging Report will show the unapplied payment throughout the year as a credit balance.
Then you can invoice your customer monthly, and apply the appropriate payment amount to each month's invoice.
When the last invoice is generated, you can apply the remaining payment amount and create a Credit Memo to cover the balance of the discounted amount, if anything was discounted.
Applying a Prepayment On an Account
To apply a prepayment onto a customer account, navigate to the Quick Menu. Select New Payment.
The Select Payment Account window will appear. Choose a Company or a Contact from the drop down, and then select Apply.
Select the Regarding dropdown.
📌Note: This is an important step as you want the payment to be applied to the correct property or opportunity in the future; since there is not an opportunity created yet, apply the payment to the Property.
Select Payment Method.
Options are Check, Credit Card, Cash, or EFT.
Other options may be available for Electronic Payments if your company has enabled Electronic Payments and a customer has a payment source saved to their record.
📌 Note: You must create an invoice in order to use the Electronic Payments in the Customer Portal.
Enter a Reference # .
This could be a check number, cash, or credit card verification number.
Select a Contact from the drop down. The Contact should be your contact person regarding the prepayment.
Choose a Branch.
If your company is multi-branch, select a branch in this drop down.
Choose a Payment Date from the calendar picker.
The date selected here should be the same day as the deposit.
Continue on to the Payment Summary side menu.
Enter Payment Notes. Entering this note type is optional.
This type of note could explain what to expect from the customer on their next payment, or details about the payment that was just recorded.
Good examples of Payment Notes are the project name or deposit for and the name of the job.
Payment Notes are visible inside of the Invoicing Module by adding a display column.
Enter Collection Notes. Entering this note type is optional.
Collection Notes are able to be viewed in the Properties module as well as in the Invoicing module in the Receivables tab.
Enter the Payment Total, which would be the Prepaid Amount.
Save. When you select Save, another text box will appear to add a note regarding the payment which is optional.
When you are ready, select Save again to finish applying the prepayment.
Important Things to Know About Prepayments
If you collect sales tax and are applying a payment to an invoice, you will need to enter as a payment instead of Credit Memo. This will populate information on the Tax Entity Report.
If you don’t collect sales tax, then you can use Credit Memos as needed to apply to invoices as created.
📑To learn more about Applying Credit Memos to Invoices, please read this article.
Applying Your Prepayment on an Invoice
Much like applying credit memos, you can apply the recorded prepayments that you made as Payments.
Locate your customer’s prepayment in the Payments tab in the Invoicing module. You can locate it with the Payment Reference, or Company Name. Select the payment to bring up the payment details screen.
Click the green checkbox next to the invoice to apply the payment from the company or contact record to the invoice. Select Save.
Then, the prepayment will appear under the Invoice section called Payments.
Using Tags or Property Notes for Prepaid Clients
🧠Add Opportunity Tags to make it easy to batch prepaid customers separately when you are working in the Invoicing Assistant.
🧠Property Tags are able to be used when filtering to work these customer invoices in the Invoices Tab in the Invoicing module! A good example of a tag might be: 2024 Contract Prepaid Customer
🧠Prepaid customers can be run in a separate batch first during your monthly billing so you remember not to email out these customers’ invoices!
🧠 Use property notes to track balances in Aspire for deferred revenue!