Advance Collections from Customers

An advance collection is a payment received from a customer before the invoice is issued. This is common for:

• Customer down payments on large orders
• Prepayments for goods to be delivered later
• Retainer fees for ongoing services
• Security deposits from customers

This page covers how to record advance collections and then reconcile them with invoices when the sale is eventually billed.

The Scenario

1. Today: TBPC receives a $5,000 advance check from a customer (no invoice yet)
2. Later: TBPC delivers the goods and issues an invoice for $5,000
3. Invoice issued: Apply the advance to the invoice to settle it

Step 1: Record the Advance Collection

Since there's no invoice yet, create a standalone customer payment:

1. Navigate to Customers > Payments
2. Click New
3. Fill in:
   • Payment Type: Receive Money
   • Customer: Select the customer
   • Amount: The advance amount (e.g., $5,000)
   • Date: Date the check was received / deposit cleared
   • Journal: Bank journal (where the money goes)
   • Payment Method: Manual Payment (check), Bank Transfer, etc.
   • Bank Reference: Check number or deposit slip
   • Memo: "Advance collection - [reason/project]"
4. Click Confirm to post the payment

The journal entries created:

• Debit: Bank (cash received)
• Credit: Accounts Receivable (customer) — creates a credit balance / negative A/R for the customer

At this point, TBPC "owes" the customer delivery — the customer has a negative A/R balance (a credit that can be applied to future invoices).

:::info Outstanding Credit Technically in accounting terms, when a customer prepays, they create an outstanding credit on their Accounts Receivable account. This is why Odoo shows "You have outstanding credits for this customer" on new invoices. :::

Step 2: Print Collection Voucher

Print the Collection Voucher for the advance collection just like any other payment:

1. Open the posted payment
2. Click Collection Voucher
3. Print via browser dialog

The voucher serves as the Official Receipt for the customer — give them a copy as proof of payment.

Step 3: Record the Invoice When Issued

When you're ready to bill the customer:

1. Navigate to Customers > Invoices and click New
2. Enter the invoice details as usual (see Recording an Invoice)
3. Fill in customer, lines, amounts, taxes
4. Click Confirm to post

When you open the posted invoice, you'll see the notification banner:

"You have outstanding credits for this customer"

This is Odoo detecting that there's an advance collection available to apply.

Step 4: Apply the Advance to the Invoice

Click Add next to the outstanding credit in the banner. This:

• Reconciles the invoice with the advance collection
• Marks the invoice as Paid (or Partially Paid if amounts differ)
• Clears the customer's Accounts Receivable balance (or reduces it)

Three Possible Outcomes

Invoice Amount	Advance Amount	Result
Equal (e.g., $5,000 invoice, $5,000 advance)		Invoice fully Paid, advance consumed
Invoice > Advance (e.g., $6,000 invoice, $5,000 advance)		Invoice Partially Paid, customer still owes $1,000
Invoice < Advance (e.g., $4,000 invoice, $5,000 advance)		Invoice Paid, remaining $1,000 advance stays as credit for next invoice

Step 5: Handle Any Residual

If Invoice > Advance (customer still owes)

The customer still owes the difference. Register a second collection for the residual amount using the standard Register Payment button on the invoice.

If Invoice < Advance (customer has remaining credit)

The remaining advance stays on the customer's account as a credit. You can either:

• Apply to a future invoice — the same "outstanding credits" banner will appear on the next invoice
• Refund — return the excess to the customer via a Credit Note + outgoing payment

Full Example Walkthrough

Scenario: Customer YOKOWO sends a $20,000 advance deposit for a custom manufacturing order. Later, TBPC delivers and issues an invoice for $22,000.

Timeline

Date	Action	Accounting Impact
Jan 15	Record $20,000 advance collection	DR Bank $20k / CR A/R $20k (credit balance)
Jan 15	Print Collection Voucher	Give to customer as O.R.
Mar 01	Deliver goods (no entry in accounting)	—
Mar 02	Issue invoice for $22,000	DR A/R $22k / CR Sales $22k
Mar 02	Apply advance ($20k) to invoice	Invoice shows Partially Paid
Mar 15	Receive remaining $2,000 check	DR Bank $2k / CR A/R $2k
Mar 15	Invoice now fully Paid

Net Accounts Receivable Balance

After all transactions, A/R for Customer YOKOWO returns to zero — the entire obligation is settled.

Summary

Advance collections use the same payment and reconciliation flow:

1. Create a standalone collection when you receive the advance (no invoice needed)
2. Record the invoice when the sale happens
3. Apply the advance via the "outstanding credits" notification on the invoice
4. Handle residuals with additional collections or by carrying forward the credit

:::tip Best Practices

• Always add a clear memo on advance collections (e.g., "Advance for PO# 12345")
• Print the Collection Voucher immediately as the Official Receipt
• Review the Aged Receivables report to spot advances still unmatched
• Use the Statement of Account to confirm each customer's current balance
• For long-dated advances, consider discussing with your accountant whether they should be classified as Customer Deposits (liability) vs. an A/R credit balance for cleaner reporting :::