Often times, a vendor may need a down payment on a purchase. SAP Business One handles this through the A/P Down Payment process. First, the user must specify a Payment Advances account. To set the account, select Administration → Setup → Financials → G/L Account Determination and then go to the General sub-tab of the Purchasing tab. You can see the Payment Advances account for the Vendor Business Partner Master data window on the Accounting/General tab.
The process starts with the Purchase Order. This is completed by SAP Business One by selecting Purchasing → A/P → Purchase Order from the Main Menu. From a Purchase Order, the A/P Down Payment invoice is created. This can be achieved in two ways: before adding the Purchase Order, select the Payment Means from the toolbar, and then from within the Payment Means window, specify the amount for the down payment. When the Purchase Order is added, the A/P Down Payment invoice is created along with the outgoing payment. A/P Down Payment invoices can also be created after adding the Purchase Order by selecting the “Copy” button on the bottom of the Purchase Order and selecting A/P Down Payment. This would require an additional step to create an outgoing payment. Either process links the A/P Down Payment to the Purchase Order.
A few things to keep in mind when using an A/P Down Payment Invoice is that the Purchase Order is not closed, even if the down payment amount is was the full amount of the Purchase Order. It would later need to be copied to a goods receipt PO and/or an A/P Invoice. The A/P Down Payment Invoice also has no impact on inventory values or inventory quantities. Additionally, the A/P Down Payment does not include tax or freight.
To process an A/P Down Payment Invoice with freight and tax, a few changes are required. For this demonstration, the A/P Down Payment Invoice will equal the Total Before Discount value and the amount due is the total of the Purchase Order. The A/P Down Payment Invoice is created from the Purchase Order and the amount due is entered to include the freight and tax.
Looking at the Journal Entry on the A/P Down Payment Invoice, this creates a receivable since the vendor owes the consumer goods. The payable is processed when the outgoing payment is applied to the Down Payment Invoice. To process the Purchase Order, the Goods Receipt must be created, which debts the inventory and credits the liability account for the Goods Received Not Invoiced. Upon creation of the A/P Invoice, the system debits the liability account for Goods Received Not Invoiced, along with the accounts for tax and freight. The receivable account is credited. The Journal Entries are shown below.