What are Pre-Payments in Xero and how do I handle them?

Applies to: Xero 

If you would prefer to watch a video on how to handle your prepayments, watch the following Webinar

Wise-Pay Best Practices - Prepayments

Wise-Pay pre-payments occur when we receive money from a client but do not have an invoice to match the payment.

When this happens, Wise-Pay will automatically create a prepayment in Xero for this amount against the nominated bank account.

The Wise-Pay Prepayment account is a Current Liability Account:

It will appear in your Bank Account Transactions as a Prepayment - Unreconciled:

And on the Dashboard against Wise-Pay Prepayments:

You will need to locate the client in Xero, and verify if the Invoice has now, subsequently been received for payment:

The Wise-Pay Prepayment account should balance to $0.00.

To ensure that a client's payments are applied appropriately, we should be aiming for the Prepayment account to return to $0.00 as quickly as possible.

The final step is to reconcile the payment in the bank statement.

When the IntegraPay Batch Payment is received to your bank account, it will generally be a total of both Prepayments and Wise-Pay Clearing transactions.

Select: "Find & Match" and search for PP_

The total amount is not likely to equal the amount received from IntegraPay

After selecting the Prepayment Transaction - add a new transaction for the remaining amount as a Direct Payment.

Once this transaction has been saved, the total amount received should match with the transactions for prepayment and Wise-Pay Clearing - you should be able to complete the reconciliation.

The original Account Transaction will now be showing as reconciled.

Other things to note

Prepayments should not be processed in the same way as Overpayments. Read more about overpayments at What are Overpayments in Xero.

In addition, it's also a good idea to get a better understanding of how prepayments behave please see the following article. 

Prepayments- What are they?

Watch the Wise-Pay "Best Practices" Webinar - Prepayments for more information.

Paul is the author of this solution article.

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