Pre-Invoices
A pre-invoice is a request for payment and a customer is not legally obligated to pay it.
Pre-invoices are similar to invoices on account. They are produced before any work is carried out on a job, and the customer pays in advance for work to be done on a project.
The difference between a pre-invoice and an invoice on account is that posting an invoice on account creates customer entries and finance entries in the general ledger, and this activity triggers tax effects, since tax activity starts when invoices are posted.
For pre-invoices, customer or finance entries are not triggered until the customer pays the pre-invoice, and thus the taxes effects are postponed until a payment is received from the customer. Pre-invoicing allows a company to delay the tax payments until some payment is received from the customer.
Pre-invoices in Maconomy are an extension to the existing job invoice on account functionality. A pre-invoice is a variant of an invoice on account that follows a different life cycle. Pre-invoices can be thought of as invoices on account where the actual effect of the invoice is moved from when the invoice is printed to when it is paid. The same windows and processes can be used to create pre-invoices as for invoices on account.
When to Use Them?
Pre-invoices can generally be used as a replacement for invoices on account, but depending on the tax requirements of the country, sometimes pre-invoices must be used instead of invoices on account, such as in Germany.
Quick Tips
- Pre-invoices are voluntary and not legally binding, as are invoices.
- After a payment is posted on pre-invoices, they become invoices on account, and can then be processed as usual.
- They are printed using an invoice layout like other Maconomy job invoices.
- They can be set up to share the invoice number series, or have a unique series sequence.
How Pre-Invoices Work
Since pre-invoices are not legally binding as are invoices, they do not show up on customer or finance entries. Pre-invoices are visible in job related windows, though they have a limited job-level effect until they are paid, at which point they become on account invoices. An unpaid pre-invoice does not affect the general ledger or the accounts receivable ledger, nor is it available for reconciliation against T&M invoices.
You can reconcile a payment against a pre-invoice in the same way as you reconcile a payment against an invoice, such as by entering the invoice number, or by selecting the invoice from a list. In general, wherever you can enter an invoice number for reconciliation, you can enter a pre-invoice number.
After a payment is reconciled on a pre-invoice, it changes behavior and becomes in effect an invoice on account, with customer entries, finance entries, and all processes that apply to invoices on account.
Unpaid pre-invoices cannot be credited, like invoices on account can be credited. If a pre-invoice is no longer needed for whatever reason, it can only be cancelled. If a pre-invoice is paid, then it can be credited.
A pre-invoicing schedule is normally agreed upon with a customer as part of contractual arrangements. This includes specific dates for pre-invoices, which are then issued in advance of any work done on a job. T&M invoices, which are also part of the schedule, are issued once a specific delivery is completed.
Even though payment of pre-invoices is not obligatory, a company may decide to only commence work on a job once a relevant pre-invoice is paid.
Some customers use pre-invoices together with regular invoices on account on the same job. They may start out with a pre-invoice on a job, and when that is paid, on account invoices follow.
Pre-invoicing on a job might come in stages as the job progresses. For example, a company may initially pre-invoice 25% of the fixed price of a job, followed by a T&M invoice of 50% when that stage is complete. The pre-invoice (if paid) would then reduce the T&M invoice amount. Afterwards, new pre-invoices and T&M invoices could follow.
You can specify pre-invoices in the invoicing plan for a job and transfer them for invoicing.
Invoicing Plan
Invoicing Plan supports pre-invoices. A single plan can contain both lines to be invoiced on account as well as pre-invoiced. A new field “Line Type” on the plan line controls this.
If the job is set up for pre-invoicing by default, then newly created lines default to pre-invoicing; otherwise, they use invoicing on account.
When transferring the plan for invoicing, Maconomy transfers only one type of line at a time (on account or pre-invoice). Once the transferred lines are invoiced, run the action again to transfer the remaining lines.
Maconomy tracks the type of lines that were transferred and does not allow them to be invoiced in a way other than is specified on the plan. For example, if lines for pre-invoicing are transferred, then it does not allow you to invoice them with an on account invoice.
Pre-Invoice History
All changes to the state of a pre-invoice are logged for historic tracking purposes. Use a new window “Show Job Pre-Invoice Events” to view changes (or “events”).
New events are logged when a pre-invoice is created, cancelled, reported on a T&M invoice, un-cancelled, or paid by the customer. An event also carries information about the related entities in Maconomy (such as a journal number for a payment received event).
A Pre-Invoice Events tab shows the history of a pre-invoice, capturing different states such as new invoice / pending payment, manual cancellation, and cancellation reversed.
On the History tab, Payment Status is not tracked for unpaid pre-invoices since payment is voluntary and not obligatory, and displays as N/A. However, once a payment is made, then the status is shown as for an invoice on account. For example, if a partial payment is made, then the pre-invoice might be shown as “Due” if the due date has already passed.
Job Invoice Allocation
A job can be set up for both job invoice allocation and pre-invoicing.
Job entries can only be allocated against pre-invoices with status payment received. Pending and cancelled pre-invoices will not contribute to the on account totals shown in the Job Invoice Allocation window.
It is common to not issue any time & material invoices on a job that uses job invoice allocation. Cancelled pre-invoices can therefore be reported to the customer via customer statements instead.
Invoice Preparation
Invoice Preparation is extended to support creating pre-invoices when the budget is used as the basis for the invoice.
You can use the Create Pre-Invoice field as an option to the Prepare Invoice action.
If the Invoice Preparation window is used to create an on account or pre-invoice selection, but the selection itself is approved in another window (such as in On Account Invoice Selection), then Maconomy ensures that the type of draft matches the setup from the “Create Pre-Invoice” field. For example, if “Create Pre-Invoice” was selected when running “Prepare Invoice,” then Maconomy prevents the user from approving an on account draft, and vice versa.
Pre-Invoices and Change of Job Dimensions
Job dimensions, such as Location, Entity or Project cannot be changed on a job if there exist open invoices on account, unless the system parameter Allow dim. change on jobs with open invoices on account is selected.
For jobs that use pre-invoicing, you cannot change job dimensions if there are pending pre-invoices on that job.
Job Charges
When a pre-invoice is created on a job set up for job charges, the charges is not applied to the pre-invoice. Maconomy does not notify the user that the defined charges were not applied.
Reconciling Pre-Invoices
A pre-invoice can be reconciled against a customer payment. Once a full or partial payment of the pre-invoice is registered, the pre-invoice becomes an on account invoice. The job and G/L effect of the invoice are applied, and finance entries for the invoice are posted with the payment date. The invoice is now also included in the job invoice on account totals and is available for reconciliation of Time & Material invoices.
Even a partial payment on a pre-invoice updates the pre-invoice to “Payment Received” status. In such a case, the full amount of the pre-invoice is already available for on account reconciliation against T&M invoices, while the remainder is tracked on the open customer entry corresponding to the pre-invoice.