Vacations, the contractor on a major remodel, tickets to an event - consumers in many cases are already accustomed to making down payments or prepaying for a purchase. As a business owner, it offers many advantages. For one, you have financial security. You have the money, or at least part of it, coming in. But there are other reasons to ask customers for a down payment or full payment in advance.
With prepayment, customers pay before they receive the product. Unlike an iDEAL payment - where customers also pay the entire amount before delivery - with a prepayment, there is a significant time between payment and final delivery.
A down payment is basically the same thing; only this time a portion of the amount is paid in advance. By law, this cannot be more than 50% of the purchase amount. Down payments are common in remodeling projects. This provides security for the contractor and limits the risk for the consumer should the building project not turn out as hoped.
Note that a down payment is not required by law, and neither is a refund. It depends on what you and your client have agreed, and what is stated in the general conditions. However, if a down payment is refundable, using it does not add that much.
It's important to properly identify how you process prepayments and down payments in the accounting records. Make sure that at the end of the complete transaction, the records are still correct. Adjusting afterwards is often difficult.
In accounting, there is a distinction between earned revenue and unearned revenue. Earned revenues are products that have already been delivered, but have not yet been invoiced. Unearned revenues are about products that have not yet been delivered, but have already been paid for by the customer. In other words, prepayments or down payments. These unearned revenues should be recorded as liabilities or current liabilities on the balance sheet.
Also pay attention to the amount of the down payment. Make a good estimate in advance of the total amount that will be billed. If the down payment ends up being higher than the final invoice amount, a credit invoice must be booked, which in turn creates additional work in the administration.
In addition, a down payment cannot be required. You will have to discuss this clearly with the customer. If you ask for a down payment, make sure it is clear to the customer what the down payment is, and state on the invoices what portion of the payment is involved. You can also choose to include the down payment in the terms and conditions.
(Web) stores and other entrepreneurs who choose Pay. as their PSP can also easily use down payments and prepayments.
Every transaction, including down payments or prepayments, comes in basically the same way. The customer pays with the chosen payment method, the transaction is processed by Pay. and visible in the admin panel. With every payment received by Pay. various data about the transaction and the customer also come along. Think about:
Based on this data, every transaction can be easily identified and administered. This also makes it possible to combine transactions that belong together in the accounting system. And because Pay. is easy to link to many accounting software, it can also be processed quickly and easily in accounting.
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