Working with advance payments (deposits) is a common practice. We use them as payment requests to our customers. Only after they are settled do the next steps follow — from dispatching goods to creating the final (tax) invoice.
An intermediate step before creating the final invoice may be the creation of a advance tax document (ATD). How to create one easily is described in our other guide. It can then be deducted in the same way as an advance invoice.
Deducting an unpaid advance
By default, a standalone advance can only be deducted once it has been paid (i.e., matched with a bank or cash document). If you want to be able to deduct unpaid advances as well, this can be enabled in the company settings.
The same setting can also be applied on the purchasing side for received advances.
Creating an invoice from an advance
If we have an advance available and want to create a final invoice directly from it — including the deduction — without creating an advance tax document, the simplest approach is to use the dedicated action available within the advance.
The prerequisites for using this procedure are:
The advance invoice is not line-item-free (i.e., the advance amount was not entered via the document header only).
The advance invoice does not generate a warehouse document (and does not have warehouse document generation configured in the document type).
The advance invoice is paid (if it is not, the company setting to allow deduction of unpaid advances must be active).
If the advance meets these conditions, you can proceed further.
After selecting this option, a window will appear prompting you to choose the invoice type for the newly created final invoice (tax document).
After confirming the "Create invoice" option, you will be notified of the progress via a notification in the bottom-left area of the interface.
Note:
The same procedure can also be applied on the purchasing side, i.e., for received advances.
Deducting an advance / ATD in an already created tax document
The second situation that may arise when working with an advance is deducting the advance from an already created final invoice. This option can be found in the line items section of the relevant invoice.
A prerequisite for deducting an advance invoice is that the relevant final invoice is not line-item-free — meaning the invoice amount must not have been entered via the document header only.
After clicking the highlighted option above, a window will appear allowing you to select the advance or ATD to be deducted from the invoice. Multiple documents can be selected at once.
A partial deduction is also available — simply check the "Deduct only a portion" checkbox. The percentage value indicates the VAT rate applicable to the given deduction.
You will again be notified of the deduction progress via a notification in the bottom-left area. If the deduction is successful, you will find the advance deduction in the invoice as a line item with a negative value.
Note:
The same procedure can also be applied on the purchasing side, i.e., for received advances.
Note 2:
An ATD can only be deducted if it is matched with a payment of the advance invoice. A manually created ATD without a link to a payment cannot be deducted.
FAQ
Not sure how to match an advance with a payment? Find out in our guide.
Want to create an ATD for the advance and deduct that instead? Learn how in our guide.