Customer Deposit Tutorial

Setup

How to Create a New Credit Term

1. Navigate to Main Menu > Setup > Accounting > Credit Terms (tab).

2. Click Add Credit Term (button).

3. Fill in fields as needed (e.g. Description and Display as = 50% Deposit, Days from = 0, Invoice = ticked, Statement = unticked).

4. Click Save (button).

How to Indicate a Deposit Requirement on a Quotation

1. Navigate to Main Menu > Office > Customers.

2. Click View (button) for a list of Customers.

3. Double-click any customer to open it and navigate to their Accounting (tab).

4. Select the applicable Credit Term from the dropdown list next to Credit Terms.

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Option A: Credit Customer Accounts with the Deposit

ℹ️ 

Procedure:

▶ A Pro-forma Invoice or Quotation is issued with a request for a deposit.

▶ The deposit is credited to the customer's account.

Advantages of this method: 

▶ Full transparency: Both the organisation and the customer can keep track of the deposits.

▶ Aligns with IFRS 15, recognising revenue only when performance obligations are met.

▶ VAT is not due until an invoice is issued.

Disadvantages of this method:

▶ It is difficult to distinguish between Customer Deposits and Customer Overpayments.

▶ If a customer has multiple orders, it will become difficult to track which deposits belong to which orders.

▶ It may understate the value of the Customer Age Analysis for lending purposes.

▶ Requesting the deposit, and following up on it, is a manual process.

Choose this option if:

▶ Deposits are not a regular part of the organisation's trading activities.

▶ The Customer Age Analysis is not tied to credit facilities.

▶ The organisation is small (e.g. only has one bookkeeper who is knowledgeable about the business).

How to Enter a Deposit Received Manually

1. Navigate to Main Menu > Accounting > Ledger.

2. Select the arrow on the New (button) > Mouse-over Customer Transactions > click Customer Receipts (CR).

3. Enter the Date and Period as per the Bank Statement.

4. Set Customer = Customer Account.

5. Set Bank = Bank Account into which deposit was paid.

6. Enter the Amount  and select No VAT.

7. Select Save (button).

8. Leave the receipt unallocated. 

9. Change the Status of the transaction to Complete.

10. Click Save (button).

How to Allocate the Deposits Received to Invoices

1. Navigate to Main Menu > Accounting > Ledger.

2. Set the Date on the left.

3. Select Filter = Customer Account.

4. Select the Customer who paid the deposit.

5. Select View (button).

6. Double click to open any unallocated Receipts in the Outstanding column and allocate them to an invoice:

7. Change the Status of the transaction to Pending.

8. Click Save (button).

9. On the bottom right in the Outstanding section, click the invoice the deposit must be allocated to.

10. Click Allocate (button).

11. Change the Status of the transaction to Complete.

12. Click Save (button).

ℹ️ With Option A, Customer Invoices are entered according to standard procedures.

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Option B: Use Control Accounts to Manage Customer Deposits

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Procedure:

▶ A Pro-forma Invoice or Quotation is issued with a request for a deposit.

▶ The deposit is credited to a Control Account (e.g. Customer Deposits Held).

▶ Once an Invoice is generated, the deposit is transferred to the customer's account.

Advantages of this method: 

▶ The organisation can keep track of its deposits.

▶ Deposits can be clearly distinguished from Customer Overpayments.

▶ Allows the organisation to keep a separate Bank Account and reconcile it with deposits held.

▶ Interest can be paid on the deposits (e.g. if the money is held in an interest-bearing bank account).

▶ The organisation's Customer Age Analysis correctly reflects what customers owe.

▶ Aligns with IFRS 15, recognising revenue only when performance obligations are met.

▶ VAT is not due until an invoice is issued.

Disadvantages of this method:

▶ Requesting the deposit, and following up on it, is a manual process.

▶ Extra accounting transactions are needed to enter and transfer the deposits.

▶ The control account must be reconciled.

Choose this option if:

▶ The Customer Age Analysis is tied to credit facilities.

▶ Interest must be paid on deposits.

▶ Accounts are audited by external auditors.

▶ Deposits are refundable.

How to Create a Deposit Control Account

1. Navigate to Main Menu > Setup > Accounting > Accounts (tab).

2. Select Add Account (button) and create an account as follows:

   1. Set Name = Customer Deposits Held.

   2. Set Code = Leave blank (or allocate a number if account numbers are used).

   3. Set Category = Current Liabilities.

   4. Leave the other fields blank.

3. Optionally create individual accounts under Customer Deposits Held.

   1. Create a new account as per Step 2, but name the account after the customer (e.g. Customer Deposit: A Smith). 

   2. Right-click the line, select Nest Under and select Customer Deposits Held.

• Note: Creating individual accounts for each customer makes deposits easier to manage and reconcile.

How to Create an Entry Type for Customer Deposits

1. Navigate to Main Menu > Setup > Transaction > Transaction Types (tab).

2. Click New (button).

   1. Below the General heading:

      1. Set Description = Transfer Customer Deposits.

      2. Set Code = TR-CD.

   2. Below the Items & Inventory Heading:

      1. Select Default Item next to Item Type.

   3. Below the Accounting heading:

      1. Tick the Accounting checkbox.

      2. Set VAT Type = No VAT.

   4. Leave all the other fields as they are.

3. Navigate to Main Menu > Setup > Accounting > Transaction Types (tab).

   1. Click Edit (button).

   2. Navigate to Transfer Customer Deposits:

   3. If you do not pay interest on deposits held you can prefill the Dr Account:

      1. Change the Dr Category field to Current Liabilities.

      2. Change the Dr Account field to Customer Deposit Control Account.

   4. If you do pay interest on deposits held, leave the Dr Category and Account blank.

   5. Change the Cr Category field to Receivables.

4. Navigate to Main Menu > Setup > Settings > Roles (tab).

5. Click Add / Update (button).

   1. Type Transfer in the search block above Module to find the new transaction (optional).

   2. Role column = click Administrator.

   3. Module column = click Transfer Customer Deposits (TR-CD).

   4. Third column Group - click Access Allowed > Setting > Transaction - Access Allowed.

   5. Click Add / Update (button).

   6. Confirm you want to Add the selected transaction.

   7. Repeat this step for any other users.

   8. Click Close (button).

6. Navigate to the newly added settings in the column Role Settings:

   1. Change the dropdown list in the Value column for each role as needed. 

   2. Ensure that at least one role has Full Access.

7. Select  Add/Update (button).

8. Select Save (button).

9. Restart the application.

How to Record Customer Deposits Received

1. Navigate to Main Menu > Accounting > Ledger.

2. Click the arrow on the New (button) > Other Income (INC).

3. Click Add Item (button).

4. Click Menu (button) > Enable Debit & Credit.

5. Select the Date.

6. Set Bank (Dr) (bar) = Bank into which the deposit was made.

7. Set Other Income (Cr) = Customer Deposit Held - Current Liabilities.

8. Set Amount = Deposit amount received.

9. Set VAT = No VAT.

10. Type in details of the deposit in the Reference and Note fields.

11. Overtype Default in the Description field with the details of the deposit.

12. Click Save (button).

13. Click Done (button).

How to Transfer the Deposit to the Customer Account

1. Navigate to Main Menu > Accounting > Ledger.

2. Select the arrow on the New (button) > Mouse-over Customer Transactions > Click Transfer Customer Deposits (TR-CD).

3. Select the Date.

4. Select the Customer Account from the dropdown list next to Customer.

5. Type in the Amount in the field provided.

6. Leave the default VAT Type (No VAT).

7. Below the line:

   1. Description: Overtype Default with details of the deposit.

   2. Set Debit = Opening Balance Control Account.

8. Navigate to the  Outstanding (section) and allocate the amount to the appropriate Customer Invoice.

9. Select Save (button).

Method 1: How to Record Interest Received on the Deposit Account

ℹ️ Use Method if only some customers receive interest and the organisation receives the rest of the interest. 

In South Africa there is no VAT on interest received or paid. Other countries may have different rules.

1. Navigate to Main Menu > Accounting > Ledger.

2. Click the arrow on the New (button) > Other Income (INC).

3. Click Add Item (button).

4. Click Menu (button) > Enable Debit & Credit.

5. Select the Date.

6. Set Bank (Dr) = Bank into which the deposit was made.

7. Set Other Income (Cr) = Interest Income

8. Set Amount = Interest amount received as per the bank statement.

9. Set VAT = No VAT.

10. Type in details of the deposit in the Reference and Note fields.

11. Overtype Default in the Description field with the details of the deposit.

12. Click Save (button).

13. Click Done (button).

• Note: Interest can also be captured when doing a Bank Import.

Method 1: How to Pay Interest to a Customer

1. Navigate to Main Menu > Accounting > Ledger.

2. Select the arrow on the New (button) > mouse-over Customer Transactions > click Transfer Customer Deposits (TR-CD).

3. Select the Date.

4. Set Customer = Select the Customer from the dropdown list.

5. Type in the Amount in the field provided. 

6. Leave the default VAT Type (No VAT).

7. Below the line:

   1. Description: Overtype Default with details of the deposit.

   2. Set Debit = Interest Income.

8. Navigate to the  Outstanding (section) and allocate the amount to the appropriate Customer Invoice.

9. Click Save (button).

Method 2: How to Record Interest Received on the Deposit Account

ℹ️ Use Method 2 if the deposits are held in trust and all the interest must be distributed to the customers. 

In South Africa, there is no VAT on interest received or paid. Other countries may have different rules.

1. Divide the Interest Received from the Bank among the Customer Deposit Accounts in proportion to their deposits.

   • Note: Total Interest Received divided by Total Deposits Held multiplied by the Customer's Deposit Held equals the Customer's Share of Interest Received.

2. Navigate to Main Menu > Accounting > Ledger.

3. Click the arrow on the New (button) > General Journal (GJ).

4. Select the Date.

5. Enter the Amount and accept the default No VAT.

6. Navigate to the line item and set Debit = Bank account from which the interest was received.

7. Navigate to the line item and set the Credit (column) to the respective Customer Deposit Held Account.

8. Click Done (button).

Method 2: How to Pay Interest to a Customer

1. Navigate to Main Menu > Accounting > Ledger.

2. Click the arrow on the New (button) > Mouse-over Customer Transactions > Click Transfer Customer Deposits (TR-CD).

3. Select the Date.

4. Set Customer = Select the Customer from the dropdown list.

5. Type in the Amount in the field provided. 

6. Leave the default VAT Type (No VAT).

7. Below the line:

   1. Description: Overtype Default with details of the deposit.

   2. Set Debit = Customer Deposit Control Account.

8. Navigate to the  Outstanding (section) and allocate the amount to the appropriate Customer Invoice.

9. Click Save (button).

ℹ️ With Option B, Customer Invoices and Receipts are entered according to standard procedures.

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Option C: Raise an Invoice for the Deposit

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Procedure:

▶ A Customer Invoice is raised for the deposit or the full job when the Quotation is accepted.

▶ The deposit is credited to the customer's account and allocated to the Invoice.

Advantages of this method: 

▶ No need to keep track of deposits.

▶ Complies with Payment-Based VAT (VAT is due or claimable when a payment takes place, not when an invoice is generated).

Disadvantages of this method:

▶ Income is recognised before the job is done:

   ▶ Which might not comply with IFRS 15,

   ▶ It may create a mismatch between income and expenditure,

   ▶ Gross margins could be overstated.

▶ Multiple invoices must be issued for the same job.

Choose this option if:

▶ The organisation is registered for payments-based VAT.

▶ There is a very small lead time between the deposit being raised and the job being done.

How to Create Customer Invoices for Deposits

1. Navigate to Main Menu > Workflow > Customer Invoices.

2. Click New (button).

3. Select the Customer and fill in the header information:

   1. Change the Date, if necessary.

   2. Select a Contact from the dropdown list.

   3. Select a Rep from the dropdown list.

   4. Enter a Reference and Note in the fields provided.

   5. Select a Category from the dropdown list next to Category.

   6. Type in an Order Number next to Order No.

   7. Select the Terms from the dropdown list next to Terms.

   8. Select a Delivery Address from the dropdown list next to Deliver to.

4. Create the items by selecting an option next to Add:

   1. Click the Custom (button).

   2. Click Menu (button) > Enable Debit and Credit.

   3. Enter a Description for the line item.

   4. Select an income account under Credit (e.g. Deposits Received)

   5. Select a VAT option under VAT Type (column).

   6. Enter the deposit Amount under Fixed Price.

5. Change the Status of the invoice to Complete.

6. Click Save (button).

   2. • Note: If you made a mistake, right-click on the item to view the context menu and select Delete Item.

How to Create Customer Invoices where Deposits Were Previously Invoiced

ℹ️ This process is to ensure accurate costing reports. 

1. Start the procedure to Create a Customer Invoice either manually or automatically.

2. Once all the line items are created, Add a Custom Item:

   1. Enter a Description (e.g. Less Deposit Paid).

   2. Select the same Income Account as you selected for the deposit (e.g. Deposits Received).

   3. Select a VAT Type.

   4. Enter a Fixed Price as a negative amount (to reduce the invoice by the deposit amount).

3. Change the Status of the invoice to Complete.

4. Click Save (button).

ℹ️ With Option C, Customer Receipts are entered according to standard procedures, regardless of whether the receipt was for the deposit or the final payment.

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Option D: Invoice the Customer and Request a Deposit

Procedure:

▶ A Customer Invoice is raised for the full job when the Quotation is accepted.

▶ The deposit is credited to the customer's account and allocated to the Invoice.

▶ When the job is complete, the customer is sent a Statement which shows the outstanding balance.

Advantages of this method: 

▶ Full transparency: Both the organisation and the customer can keep track of the deposits.

Disadvantages of this method:

▶ Income is recognised before the job is done:

  ▶ Which might not comply with IFRS 15,

  ▶ It may create a mismatch between income and expenditure,

  ▶ Gross margins could be overstated.

▶ If the organisation is registered for Invoice-based VAT, VAT becomes due on the full invoice once it is issued.

Choose this option if:

▶ The organisation is registered for payments-based VAT.

▶ There is a very small lead time between the deposit being raised and the job being done.

How to Display a Deposit Requirement on an Invoice

1. Navigate to Main Menu > Office > Customers.

2. Click View (button).

3. Double click to open a Customer Account.

4. Click the Accounting (tab).

5. Select  the appropriate Credit Terms from the dropdown list.

   • Note: If there is no term that indicates the deposit requirement, you can create one as explained above.

6. Click Save (button).

How to Create Customer Invoice

1. Create a Customer Invoice as per standard procedures.

2. Indicate the deposit requirement by selecting the terms on the invoice.

   • Note: If the invoice is linked to a Sales Order, leave the Status of the Sales Order as Active (instead of marking it Complete).

ℹ️ With Option D, Customer Receipts are entered according to standard procedures, regardless of whether the receipt was for the deposit or the final payment.

How to Display the Deposit Payment to the Customer

1. Record and allocate the deposit payment to the Customer Invoice as per standard procedures.

2. Navigate to Accounting > Customer Ageing.

3. Click View (button).

4. Click the Customer.

5. Click Output (button) > Email / Print / Preview.

Related Topics

• Process Guide: Customer Deposits