Xero | Record an overpayment

Record an overpayment transaction if your client accidentally pays too much or if you overpay a supplier. This guide outlines how to record an overpayment in Xero and the limitations to be aware of.

This guide, along with many others, can be found in Xero Central

Create an overpayment during bank reconciliation

An overpaid bill or invoice

Record and reconcile a payment for the amount of the bill you've received, or invoice you've sent. 

For the additional payment, create a new spend or receive money transaction as an overpayment.

1. Record and Reconcile the payment for the correct amount of the bill or invoice.

2. For the additional payment, created a new Spend or Receive Monday transactions as an overpayment. 

3. In the Reconcile tab of your bank account, for the  relevant bank statement line, click Find & Match.

4. Search for the overpaid bill or invoice, then select the transaction.

5. Click New Transaction, then select Spend Money or Receive Money, depending on whether the bank statement line is a withdrawal or deposit.
   
   

6. Next to Spent as or Received as, click Direct payment, then select Overpayment.
   
   

7. Enter the overpaid amount. The Account and Tax Rate fields are locked. 

8. (Optional) Select the Tracking Category if necessary..

9. Click Save Transaction, then click Reconcile.

A bill or invoice paid twice

If a bill or invoice is paid twice in error, reconcile the first payment with the bill or invoice entered in Xero, then create an overpayment transaction for the duplicate payment.

1. Reconcile the first payment with the bill or invoice.

2. For the duplicate payment’s statement line, create an overpayment transaction:

3. in the Create tab for your statement line, click Add details.

4. Next to Spent as or Received as, click Direct Payment, then select Overpayment.

   

5. Enter the duplicate payment amount. The Account and Tax Rate fields are locked. 

6. (Optional) Select the Tracking Category if necessary.

7. Click Save Transaction, then click Reconcile.

Fix problems with reconciling an overpayment

If you encounter an error while trying to reconcile an overpayment, such as Xero mistakenly applying tax, resolve this by creating the overpayment outside of the bank reconciliation screen and then reconciling using Find & Match. 

For more details, refer to the related known issue article in Xero Central.

Create an overpayment from a bill or invoice

Create an overpayment when you apply a payment to a bill or invoice, for an amount that's greater than the amount due. Note: bill or invoice needs to be in awaiting payment status

1. In the Business menu, select Bills to pay or Invoices.

2. Find and open the overpaid bill or invoice.

3. Click Add payment.

4. Under Amount paid, enter the full payment amount received.

5. Select the bank account and payment date for the payment.

6. (Optional) Enter a reference to record on the payment transaction.

7. Enter a description for the overpayment.

8. (Optional) If you've set up tracking for your organisation, select the tracking category for the overpayment.

9. Click Add.

10. Reconcile the statement line in your bank account using find & match.

Create an overpayment anywhere in Xero

Create an overpayment from any screen in Xero using the create new  icon in the navigation menu. You might create an overpayment this way if you’re in the middle of entering your conversion balances and you have outstanding overpayments, as at conversion date.

1. In the navigation menu, click the create new icon, then select Spend money or Receive money. The transaction type depends on whether you’re creating an overpayment you’ve paid or received.

2. Select the bank account, then click Next.

3. Next to Spent as or Received as, click Direct Payment, then select Overpayment.

4. In the To or From field, enter the name of the supplier or customer, and then select the payment date. 

   • For pre-conversion overpayments, the date must be on or before your conversion date.

5. (Optional) Select the appropriate currency and enter the details of the overpayment

6. (Optional) Select the tracking category if necessary.

7. Click Save.