Handle a customer overpayment

Sage Sole Trader doesn't hold a customer overpayment as a payment on account. Find out what you can do when a customer pays more than an invoice.

Sometimes a customer pays more than the invoice total. In some accounting software, you keep the extra amount as a payment on account. This is a credit on the customer's account that you use against a future invoice.

Sage Sole Trader works differently. Invoices and payments are separate records, and there's no customer account that holds a credit balance. This means you can't store an overpayment as a payment on account.

Sage Sole Trader uses cash basis accounting, so you record income when you receive it. This affects how you handle the extra money.

You have two main options when a customer overpays. You can refund the extra amount, or keep it toward future work. Both start with recording the full amount you received.

Record the money you received

When your bank feed brings in the payment, it arrives as one transaction in your Draft list for the full amount.

1. Go to your Draft transactions.
2. Find the money-in transaction for the amount your customer paid.
3. Choose an income category.
4. Select Save to move it to Completed.

This full amount is your income for cash basis, because you received it. If you entered the payment manually instead of through a bank feed, add it as an income transaction.

Mark the invoice as paid

Marking the invoice as paid keeps your invoice list accurate. It’s separate from the money-in you recorded above.

1. Go to Invoicing.
2. Find the invoice and select Actions, then Add a payment.
3. Enter the payment amount.
4. Leave Create money-in transaction unticked.

Refund the extra amount

If you send the extra money back, record the refund so your figures stay correct. Turn off auto-categorisation first, because you can’t record an auto-categorised transaction as a refund.

1. Find the transaction for the money you sent back.
2. Select Actions, then Record as refund.
3. Choose the same category you used for the original income.
4. Select Save.

Keep the extra amount for future work

If your customer leaves the extra amount with you, it still counts as income when you receive it. When you raise the next invoice, mark it as paid without recording another money-in transaction. This stops the same money counting twice.

Use Sage Accounting for payments on account

If you often hold customer credit or need payments on account, Sage Accounting Standard and Plus support this.

It keeps a customer account with a credit balance that you allocate to future invoices or refund later.