What are Overpayments in QuickBooks Online
A batch payment 'Overpayment' will go through the following 3 steps when created:
- Create an invoice for payment (liability debit to take up the liability and allow for payment via Wise-Pay clearing account)
- Create a credit note (liability credit from prepayment account to credit note)
- Apply credit note (to future invoices)
- (User initiated) Payment sync will then apply payment to ConnectWise invoice (applied liability from credit note to invoice - revenue)
Invoice transactionPurpose: the function of the invoice transaction is to take up the liability, and allow a payment to be applied to the invoice in the same way as a normal payment would.
An invoice is created for the company making payment, with Wise-Pay then allocating the amount of money collected to the user defined Wise-Pay Prepayments account. The payment of this invoice is applying against the Wise-Pay payment account. This then allows funds to be reconciled in the same way as any other deposit being allocated to the payment account (such as the process for Wise-Pay Clearing)
Credit Note TransactionPurpose: The purpose of the credit note transaction is to bring in an accounting transaction that will allow the allocation of the 'overpayment' created and applied to the Wise-Pay prepayment account. This transaction will appear on the company account as a credit, and can be applied to any future invoices.
The credit note transaction will take the money out of the liability account (Wise-Pay prepayments) and then apply it against an invoice as an application of credit
Apply Credit NotesPurpose: when you apply a credit note, the payment is applied to the invoice at the time when the credit is applied. As QBO is correctly allocating the payment via a liability account, revenue is then recorded as per the date of the invoice (accrual) or date when the payment is applied (cash).
The following example shows a number of credit notes that are available to be applied against an invoice as a result of a Wise-Pay Overpayment being created in the earlier steps