Advance Payment to a Vendor

There are a few ways to handle a situation where you need to pay a deposit for a purchase order, or you need to prepay a vendor without having an invoice yet.

Prepay with a Manual Check and a Prepaid Expenses GL Account

• This method allows you to track prepayments in a dedicated GL account (Prepaid Expenses), specify the true expense (or asset) accounts later, and draw back down the prepayment GL account (during Completed PO to AP). 
• Go to Expenses -> Checks -> Manual Checks and start a payment to the vendor requiring a prepayment.
• If you don't have a Prepaid Expenses GL account, create a Prepaid Expenses asset GL account (or similar), and choose this account as the account for the prepayment.
• Create a PO, receive the PO, and send the PO to accounts payable by using Expenses -> Purchase Orders -> Completed PO to AP. 
• When on the Completed PO to AP screen after selecting the items to include on the invoice, click the Add Misc GL Entry button and add a line with a negative amount to the Prepaid Expenses GL account that was used in the Manual Checks process.
• With this method be sure not to check the Prepaid box on this page as that will prevent a vendor bill from being created.  Click Save to generate the bill.
• If the bill was fully prepaid and is not listed as closed automatically, go to Expenses -> Vendor Bills, locate the bill and click to edit it. If the balance is zero, you can click the button at the top of the page labeled Set Status: Closed. This will mark the bill as closed.

Prepay with a Manual Check and No Prepaid Expenses GL Account

• This method won't track any activity in a Prepaid Expenses GL account. You will instead specify the GL accounts to be used for expenses when the prepayment is made.
• Go to Expenses -> Checks -> Manual Checks and start a payment to the vendor requiring a prepayment.
• Specify the breakout of GL accounts that the payment should go towards. These will generally be expense and/or inventory asset accounts.
• Create a PO (Expenses -> Purchase Orders -> New Purchase Order) and mark the box labeled Prepaid in the Additional Info section.
• Receive the PO (Expenses -> Purchase Orders -> Receive Items on PO), and pass the PO to payables (Expenses -> Purchase Orders -> Completed PO to AP). After selecting the items to include on the vendor bill, be sure the Prepaid box is checked before clicking Save.
• The system will create a zero amount vendor bill if the bill is marked as Prepaid. The general ledger entries for the PO will need to be taken care of in the first step of the prepayment.

Prepay with the Credit Card Tracking System

The credit card tracking system (see more info) allows you to mark POs as prepaid by credit card. You can then convert credit card purchases (Expenses -> Credit Card Purchases) into credit card bills (Expenses -> Credit Card Bills -> New Credit Card Bill). When using the credit card tracking system, POs won't go through the Completed PO to AP process as a vendor bill will only be created for the credit card bill. 

NOTE: No automatic credit card processing will take place for credit card purchases or POs marked as prepaid by credit card. This is simply a method to track the various charges made to your credit cards.