Progress or Partial Invoicing

LukMik

We are a new business and have various payment terms. A typical term is 50% with PO 50% upon completion.
What is the best way to deal with this?
The customer will issue one PO for the total amount.
How would you recommend we invoice this from wave?
I have looked at the create invoice and accounting to find answers but have had no luck.
Thanks

KiahD

Hey @LukMik !

Whilst we don't have a specific feature to create Purchase Orders, what you could do is create an Estimate, and change the heading to Purchase Order. This estimate can also be converted into an invoice, so you don't have to create one separately!

That said, if you're planning on taking payments via Wave Payments, it's not possible to do so through estimates, only on invoices. In this case, I recommend sending both the estimate (Purchase Order) and invoice at the same time. It's possible to make partial invoice payments through Wave, so your customer can pay the established % at the time of receiving the purchase order, and the rest later!

You can also add your payment terms as a default to your estimates and invoices under Settings > Invoice Customisation, in the Default notes and Standard memo section

Moshell

@LukMik
Unless you are using the cash method of accounting, you shouldn't issue an invoice for a down payment request. If you are using cash method, you don't recognize revenue until you receive the first down payment. Reminding the customer that their down payment is due is not an accounting event. You have not earned the revenue, therefore you cannot create a receivable. You should create a payment request outside of Wave and when the payment is received (the first accounting event), you categorize it to a "Customer Deposits/Down Payment" liability account. As you complete the project and invoice the customer, whether at predefined thresholds or upon completion, you debit the deposit liability and credit revenue. Once the deposit is fully exhausted, you debit receivables.

Invoicing customers as you complete the project is called percentage of completion accounting and is preferred in the US if the projects are likely to cross fiscal periods or are very large in nature (e.g. building a sky scraper). The much simpler method is completed contract, which is what you described in your 50%/50% scenario. You only invoice once at the end of the project. Periodic payments by the customer are recorded as liabilities (customer deposits) until the contract is finished all revenue and expenses are recorded at once. Expenses should also be held on the balance sheet (as work in progress) until project completion. It can get pretty complex.

If you are using Wave payments, which KiahD explained can only be utilized via Invoices, I recommend creating a product called "down payments" or "50% deposit" or something similar. Create a separate income account to assign this product to, also labelled Customer Deposits. It will still be incorrectly included in your P&L but can more easily be identified by financial statement users. Upon completion of the project, only invoice the customer the remaining balance due, and then use a journal entry to reclassify any remaining deposits into true revenue.

I have experience with construction/project accounting if you need bookkeeping or accounting services.
Thanks