Record an prepayment transaction before you raise an invoice for your customer, or before you receive a bill from your supplier. This guide outlines how to record a prepayment in Xero and the limitations to be aware of.
This guide, along with many others, can be found in Xero Central
Integrations Limitations
Please note that overpayments, credit notes or prepayments on a client's account in Xero will not be visible in LightSpeed or Vital. This is a known limitation. However, once the prepayment is applied to an invoice, it will also update the invoice in Lightspeed and Vital if the invoice is fully paid. For partially paid invoices, only LightSpeed will reflect the outstanding amount.
Create a prepayment from your bank account
If the statement line for the prepayment hasn’t come through to your bank account in Xero, you can create the prepayment transaction first.
In the Accounting menu, select Bank accounts.
For the relevant bank account, click Manage Account, then select Receive Money or Spend Money.
Next to Received as or Spent as, click Direct Payment, then select Prepayment.
Enter the transaction details (see note below regarding account).
Click Save
Create a prepayment during bank reconciliation
If the statement line for the prepayment has already come through to your bank account in Xero, you can create the matching prepayment transaction during bank reconciliation.
On the bank reconciliation screen, next to the bank statement line you want to reconcile, select the Create tab.
Click Add details.
Next to Spent as or Received as, click Direct Payment, then select Prepayment.
Enter details of the transaction (see note below regarding account).
Click Save Transaction, then click Reconcile.
Which account applies to prepayments
You can record prepayments in the account 2500-004 Customer deposit (current liability). If you prefer to record the amount received to the accounts receivable account you can enter the transaction as an 'overpayment'. Please consult with your accountant for the preferred method.
Customer deposit account not appearing on your dropdown?
Navigate to chart of accounts > click on account name > tick enable payments to this account.
