Prepaid Invoicing

With Prepaid invoicing, a rental contract can be invoiced and due as of the Rental Start Date or Shipment Date (depending on the setting in the Invoice Start Date Origin field in Rental Setup) for the entire rental period or rental invoice period.

The determining factor for the period is the Invoice Period field on the line:

  • If set to Fixed Rate, the entire rental period is invoiced at a fixed rate.
  • If set to other than Fixed Rate, the selected invoice period is invoiced.

The Prepaid field determines whether prepaid invoicing is used. This toggle can be turned on automatically in Rental documents via the Def. Prepaid setting in the Rental Setup page.

Exercise – Process a prepaid invoice for entire period

A customer needs to rent an item starting February 1 through July 31. The price of the rental is 350.00 per month, and must be paid in full at the start of the rental period. Your company uses the shipment date as the invoice start date. The customer agrees to these terms and receives an invoice for 2100.00, due upon shipment, which is February 1.

The Rental Contract is created with Invoice Period = Fixed Rate and the Prepaid toggle turned on, the pricing is updated, and the invoice is posted for the full amount.

Set up the price structure

  1. Choose the Lightbulb that opens the Tell Me feature icon, enter Rental Price Lists, and then choose the related link.
  2. Create a new price list or open an existing price list.
  3. Add an entry for the item/machine for:
    • Billing Unit = MONTHS
    • Unit Price = 350.00

Create the rental contract

  1. Insert a new Rental Contract for the customer.
  2. In the Rental Billing Unit field, enter MONTHS.
  3. In the Rental Start Date field, enter 2/1/2022.
  4. In the Rental End Date field, enter 7/31/2022.
  5. In the Invoice Period field, select Fixed Rate.
  6. Turn on the Prepaid toggle, if not already set by default.
  7. On the Lines FastTab, enter the item number.
  8. In the Quantity field, type 1.

Process the invoice

  1. On the Home menu, choose the Create Shipment Transfer Orders action.
  2. On the Home menu, choose the Transfer Orders action.
  3. Open the shipment transfer order.
  4. Turn on the Direct Transfer toggle.
  5. On the Home menu, choose the Post action and then choose the OK button in the confirmation message.
  6. Go back to the Rental Contract.
  7. On the Lines FastTab, choose Line > Related Information > Rental Ledger Entries.
  8. Notice that a single entry exists with a due date of 2/1/2022, which is the shipment date, and the Period Total Price is 2100.00.
    NOTE: In a non-prepaid rental entry, the due date is the ending date of the rental period (July 31).
  9. Go back to the Rental Contract.
  10. On the Home menu, choose the Post action.
  11. Choose the OK button.
  12. Leave the Posting Date field set to 2/1/22.
  13. In the Invoice to Date field, enter 7/31/22. Alternatively, leave this set to 2/1/22; the invoice is created the same either way.
  14. Choose the OK button to create the invoice and then accept the confirmation message.
  15. On the Related menu, choose Documents > Invoices.
  16. Open the invoice and notice that the total agreement pricing (2100.00) is used.
  17. Post the invoice and then go back to the Rental Contract.
  18. On the Lines FastTab, choose Line > Related Information > Rental Ledger Entries.
  19. Notice that there no new entry because the rental period was completely invoiced.

Process the return

The return for the prepaid rental can be done before or after the rental end date using the regular return process; however, an early return will not be credited because the negotiated price is fixed for the rental period.

Exercise – Process a prepaid invoice for invoice period

A customer needs to rent an item starting February 1 through July 31. The price of the rental is 350.00 every month, and must be paid in full at the start of the invoice period. Your company uses the shipment date as the invoice start date. The customer agrees to these terms and receive invoices for 350.00, due upon shipment, which is February 1, then on March 1, and so on.

The Rental Contract is created with Invoice Period = Month and the Prepaid toggle turned on, the pricing is updated, and the invoice is posted for the full amount.

Set up the price structure

  1. Choose the Lightbulb that opens the Tell Me feature icon, enter Rental Price Lists, and then choose the related link.
  2. Create a new price list or open an existing price list.
  3. Add an entry for the item/machine for:
    • Billing Unit = MONTHS
    • Unit Price = 350.00

Create the rental contract

  1. Insert a new Rental Contract for the customer.
  2. In the Rental Billing Unit field, enter MONTHS.
  3. In the Rental Start Date field, enter 2/1/2022.
  4. In the Rental End Date field, enter 7/31/2022.
  5. In the Invoice Period field, select Month.
  6. Turn on the Prepaid toggle, if not already set by default.
  7. On the Lines FastTab, enter the item number.
  8. In the Quantity field, type 1.

Process the invoice

  1. On the Home menu, choose the Create Shipment Transfer Orders action.
  2. On the Home menu, choose the Transfer Orders action.
  3. Open the shipment transfer order.
  4. Turn on the Direct Transfer toggle.
  5. On the Home menu, choose the Post action and then choose the OK button in the confirmation message.
  6. Go back to the Rental Contract.
  7. On the Lines FastTab, choose Line > Related Information > Rental Ledger Entries.
  8. Notice that a single entry exists with a due date of 2/1/2022, which is the shipment date, and the Period Total Price is 350.00.
    NOTE: In a non-prepaid rental entry, the due date is the ending date of the invoice period (February 28).
  9. Go back to the Rental Contract.
  10. On the Home menu, choose the Post action.
  11. Choose the OK button.
  12. In the Posting Date field, enter 2/1/22.
  13. In the Invoice to Date field, enter 2/28/22.
  14. Choose the OK button to create the invoice and then accept the confirmation message.
  15. On the Related menu, choose Documents > Invoices.
  16. Open the invoice and notice that the agreement pricing (350.00) is used.
  17. Post the invoice and then go back to the Rental Contract.
  18. On the Lines FastTab, choose Line > Related Information > Rental Ledger Entries.
  19. Notice that an entry exists for the next invoice period (3/1/2022 - 3/31/2022), with a due date of 3/31/2022, and the period total price is 350.00.

Process the return

The return for a prepaid rental can be done before or after the rental end date using the regular return process; an early return can be credited.

Credit early return

If items in a prepaid rental contract are returned early, a credit memo can be created automatically to offset the already invoiced amount. Whether this credit memo is created automatically, by confirming a question, or not at all is based on the Create Cr. Memo for Overpayment setting in the Rental Setup page. When posting the return, the credit memo is:

  • not created if the setting is Never
  • created after confirming the message if the setting is Question
  • created automatically if the setting is Always

The credit memo will prorate the amount for the early return.

If the Create Cr. Memo for Overpayment field is set to Never, you can use the Create Credit Memo for Overpaid Returns action in the Rental Contract to create one.

Important

A credit memo is not created for an early return if the Invoice Period = Fixed Rate because the negotiated price is fixed for the rental period.

Example - Process early return for invoice period

A prepaid item is rented from April 1 - April 30 with a rental price of 350.00. The rental item is shipped and invoiced on April 1 and the customer returns it on April 15. You have chosen to get a message confirming the creation of a credit memo for overpayments. This example uses the Item Journal but the credit memo is created the same way using the Transfer Order.

Set up for crediting and create the rental contract

  1. In the Rental Setup page:
    • set the Transfer Posting field to Item Journal and assign the template in the Item Journal Template Name field.
    • choose Question in the Create Cr. Memo for Overpayment field
  2. Create the Rental Contract for April 1 - April 30 with Invoice Period = Month, Prepaid = on.
  3. Enter the item with rental price 350.00 for a quantity of 1.

Post the shipment and invoice

  1. On the Home menu, choose then the Post action.
  2. Choose the Post Shipment option and then choose the OK button.
  3. On the Home menu, choose then the Post action.
  4. Choose the Create Invoice option and then choose the OK button.
  5. In the Posting Date field, enter 4/1/22.
  6. In the Invoice to Date field, enter 4/30/22.
  7. Choose the OK button to create the invoice and then accept the confirmation message.
  8. On the Related menu, choose Documents > Invoices.
  9. Open the invoice and notice that the agreement pricing (350.00) is used.
  10. Post the invoice and then go back to the Rental Contract.
  11. On the Lines FastTab, choose Line > Related Information > Rental Ledger Entries.
  12. Notice that a single entry exists with a due date of 4/1/2022, which is the shipment date, and the Period Total Price is 350.00.
  13. Go back to the Rental Contract.

Post the return and credit memo

  1. Change the Work Date to 4/15/22.
  2. In the Lines FastTab, enter 4/15/22 in the Rental Return Date field and 1 in the Return Qty. to Receive field.
  3. On the Home menu, choose then the Post action.
  4. Choose the Post Return option and then choose the OK button.
  5. In the create credit memo confirmation message, choose the Yes button.
  6. On the Related menu, choose Documents > Credit Memos.
  7. Open the credit memo and notice that the overpaid date range (4/16/22 - 4/30/22) is listed with a price of 175.00, which was calculated as rental rate / number of days * credited days (350 / 30 * 15 = 175.00).
  8. Post the credit memo and then go back to the Rental Contract.
  9. On the Lines FastTab, choose Line > Related Information > Rental Ledger Entries.
  10. Notice that a second entry exists for the credit memo with start and end dates of 4/16/22 and 4/30/22, a due date of 4/16/2022, and the period total price is 175.00.

See Also

Fixed Rate Invoicing
Status of Prepaid Contract

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