Wise-Pay Overpayments in Xero
A batch payment 'Overpayment' will go through the following 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 form credit note to invoices - revenue)
ExampleThis example of Overpayments created via a Batch Payment will provide an example of the steps mentioned above
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 a 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 as part of Step 1. 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 as created in Step 1, the payment is applied to the invoice at the time when the credit is applied. As Xero 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 invoice 572, as a result of a Wise-Pay Overpayment being created in the earlier steps.