Handling Customer Overpayments

What to do when a customer pays more than they owe, and how to track the extra money until it's used.

Example used throughout: a customer owes $170 on an invoice and sends a check for $200, leaving $30 of extra money.

Key concept: money "on account"

Discovery requires every payment to be fully allocated when it's entered — the applied amounts must add up to the payment total. When a payment is more than the invoice, the extra is applied to the client account instead of an invoice. This is called an on-account or unapplied amount: the money is recorded and tied to the right customer, but it hasn't paid off any invoice yet.

Two things to know about on-account money:

• The customer will NOT see it on their next bill automatically. Invoices only show payments applied to that specific invoice. Someone must manually move the credit onto a future invoice (Step 2 below).
• Tracking it is a manual routine (Step 3 below).  At this time, there is no automated reminder.

Step 1 — Record the overpayment

1. Go to Client Payments and start a new payment batch (choose the payment method — check, ACH, cash, or credit card — and fill in the receipt details).
2. In the payment spreadsheet, enter the payment on two rows, both with the same payment details (same check number, check amount, check date, and remitter name):
   1. On row 1, type the invoice number and applied amount of $170 to apply payment to that invoice.  
   2. On row 2, don't type anything into the Invoice Number cell — go straight to the Client Account column and pick the account.  The account selector is only available while the invoice field is empty.  Then type the applied amount of $30.

3. Click Apply Payments to submit the batch. The two applied amounts must add up to the check amount ($170 + $30 = $200) or the batch will be rejected with an error.

Fixing a payment that's already been entered

If a payment was entered differently (for example, all $200 was applied to the invoice by mistake), open the payment from Client Payments, and in the Payment Application Details table:

• Remove an incorrect application row with the X button.
• Add a new row: leave the Client Invoice Number box empty and a Client Account dropdown appears in the next column — select the account, enter the amount and date, and click the + button.

Step 2 — Use the credit on the customer's next invoice

When the customer's next invoice is generated, before sending it:

1. Open the payment (find it with the Has Unapplied Amounts filter — see Step 3).
2. In Payment Application Details, remove the on-account row (the $30 applied to the client account) with the X button. The system won't let a payment be over-allocated, so this must be removed before the amount can be applied to an invoice.
3. Add a new application row: enter the new invoice's number, the amount ($30), and the date, then click +.

If the customer wants the money back instead

Use the Refund option on the payment page. Note that refunds apply to the entire payment — there is no partial refund of just the $30. If the payment is already partly applied to an invoice, refunding is not the right tool.

Step 3 — Track unapplied payments (the routine)

Because nothing in the system flags on-account money automatically, build this into a regular pre-billing routine:

Client Payments index — the worklist

1. Go to Client Payments and open the search filters.
2. Set the Show Payments filter to Has Unapplied Amounts.
3. Every payment listed has money that hasn't been applied to an invoice — either sitting on account or not applied anywhere. Work through the list: apply credits to open invoices, or confirm they're intentionally waiting for the next bill.

On an individual payment

Open the payment and compare the Applied total to the payment total. The Payment Application Details table shows exactly where every dollar went — each row links to the invoice or client account it was applied to.

Accounts Receivable Aging Summary report

The A/R Aging Summary report correctly nets out on-account money: unapplied amounts appear as a negative (credit) "unapplied payments" figure on the client account's row, so the account's true balance already reflects the credit. Money received but not applied to any account or invoice rolls up at the company level.

Audit trail

Every apply/unapply action is recorded in the invoice's activity log with amounts and dates, so the history of where the money moved is always available.

Quick reference

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