Processing An Excess Payment (a tip)

Purpose: Sometimes a customer will pay an invoice and ask us to keep the change.  In order to account for this "tip" we need to do some bookkeeping.  We have a couple of options:

  1. Adjust the invoice to match the amount of the payment.
  2. Process the payment "normally" and later adjust the excess payment using a journal entry to post the excess amount as a gift.


The first option, adjusting the invoice is obvious so I won't go into that.  The second option is the preferred option as it correctly records the excess payment.  The steps are:

  1. In the Customer navigation window, select the <Receive Payments> icon and post the full amount of the payment.  In some cases the invoice amount may be something like $56.60 and the customer gives you $60.00.  In this case post the $60.00 because this is the amount that will inevitably be deposited in the bank.
  2. Next (this can be done later, but is preferrably done ASAP), post a journal entry for the excess amount: a)  Select the <Make Journal Entry> icon on the Banking Navigation page to go to the journal entry page. b)  Set the date accordingly.  Usually the date is the same as the original payment, but in some cases such as yearend clean up, I set the date to the last yearend date. c)  The first line of the journal entry should be to the "customer invoices" account, an amount in the debit column of the excess, a note in the Memo column stating "clear excess payment", and the Name column must have the name of the customer. d)  The second line should have the account of "Gift Received", the excess amount will automatically appear in the credit column, and the memo column should have the same memo as the first line. e)  Save the journal entry.
  3. Go to the "Customer Payment" window of the payment amount that held the excess payment.  This window should now have a jounral entry line that reflects the excess amount.
  4. Highlight and make sure there is a check in the journal entry line.  The "Unused Payments" total at the bottom right of the detail window should now show 0.00.
  5. Click the <Set Credits> button and that should put you into the "Discounts and Credits" window.
  6. In the "Discounts and Credits" window you should see no details remaining in the credits detail window.
  7. Select the <Done> button.
  8. Then in the "Customer Payments" window, save.

Double Check

An easy way to find and clear the excess payments is by displaying the "A/R Aging Detail" report (go to reports/customers & receivables and select the A/R Aging Detail report).  This report shows all customers that have not got balanced accounts, they either owe us money or they are in an excess balance.  The excess balance accounts will show as negative balances.  Double-clicking on a negative balance will bring up the "Customer Payment" window.