What is the best way to handle a vendor prepayment in Cetec ERP? There are two main parts of the vendor prepayment process, first the initial prepayment and second, what to do when the inventory comes in.

To represent the initial prepayment:

First, you must have an initial PO line; we need a flag on the PO line to mark it as a prepaid item. (The current recommendation is to use a bonus column and tie it to a fifoix bonus column.)

• To create a vendor prepayment in Cetec ERP start by creating a PO from the prepaid item.

• Set the extended cost on the PO.

Second, you must also have an initial voucher with a split coded to a prepaid inventory asset account. You need some way to tie the PO Line to the voucher even though it’s not received yet. It is best practice to have a PO and a voucher for any purchase, even a prepaid purchase for a credit card.

• Create a voucher for the same amount as the extended cost on the PO.

• You can put in a comment in the vendor invoice # field indicating that this invoice template is related to the prepaid purchase order you just created.

• Fill out all the fields you need and then hit Submit to finish.

• Now, switch the account mapping on the vendor invoice (voucher) split from the default mapping TO a prepaid inventory asset account.

• GL activity:
  • DB prepaid asset
• CR A/P

Third, you must have a system A/P one-off check.

• Create a check in Cetec. (It wont necessarily be a real paper check. Its the transaction to recognize the draw out of cash or credit card associated with your prepayment.)
• Select which account (cash, or credit card, etc.) you are paying out of via the Credit field when creating the system check.
• Check the box next to “Create For Vendor with Address.”
• Type in the name of the vendor you are prepaying.
• Click Create.
• Indicate the payment type on the check screen.
• Add a debit split.
• Map the split to a clearing account; it’s up to you which clearing account this could be.
• Add the value.

• Click Submit. \

• GL activity:
  • DB clearing account x
  • CR cash

Fourth, you must have a debit memo.

• Next, create a debit memo to sit as a credit on the vendor account so that when the final invoicing is processed, the debit memo can be applied to the vendor invoice, so you dont pay them twice!
• (You already paid the vendor with the prepayment cash/credit charge.)

• Map the debit memo to CREDIT that same Account you mapped on the system check transaction you just did. \

• GL activity:
  • DB A/P
  • CR clearing account x

There have been three transactions so far: the stubbed vendor invoice, the system check for the credit card (or cash) charge, and the debit memo.

• Net GL impact thus far:
  • DB prepaid asset
  • CR cash

You want these balances to sit, until the inventory actually comes in. Sometimes more transactions will need to be completed.

Note that Cetec ERP has the capability to flag PO Lines as prepaid using our user defined fields (bonus columns). This can be done by an Admin user.

• Go to Admin > Maintenance > Bonus Columns > PQuote line
• Enter a title for your bonus column. This is what users will see.
• Enter a technical name. This is the unique name Cetec will use behind the scenes to identify this bonus column.
• Click Add New.
• Click the checkbox to make the bonus column searchable and then click Update.
• You can also tie inventory receipts to be populated with the prepaid flag automatically, if and when inventory is received against a PO Line. An Admin user can set this up for you in Cetec ERP.
• Click Back To All
• Click FIFOIX.
• To keep things clear, enter the same title you created for the PQuote line bonus column you just created.
• The technical name must EXACTLY match the technical name from the PQuote line bonus column you just created. Note: Cetec adds in the “_bc” at the end of the technical name. You do not need to type that in.
• Click Add New,
• Tell Cetec where to pull this receiving bonus column’s data from.
• In this case, we want Cetec to pull data from the bonus column on the PQuoteLine, so you’ll select this from the drop-down list.
• Click the checkbox to make this bonus column searchable.
• Click Update.
• Now you have set up the bonus columns.
• Go to a purchase order and click on the edit screen.
• Scroll down to the PO line and click advanced. There you will see the bonus column that your Admin user created.
• Fill in the bonus column field and click update.

Once the inventory comes in:

• Receive the item into inventory. If you set up the bonus column outlined above, you will notice that the bonus column comes through to the PO line receipt. This also happens when you receive an item into stock.
• Now, you can look up the original vendor invoice that was stubbed in for the PO.

• Go to A/P > Voucher List and click submit on the voucher list. \

• GL activity:
  • DB inventory
  • CR accrued liabilities \
• You need to flip the account mapping on the split from prepaid inventory to an accrued liabilities account. This will move the balance previously in Prepaid (potentially in a previous period) to Accrued in real time. This will also CLEAR the accrual that occurred in the GL at the time the item was received into stock.

• Click Submit. \

• GL activity: \ \ Cancel the previous prepaid asset balance: \

  • DB prepaid asset
  • CR A/P

  Replace it with:

  • DB accrued liabilities
  • CR A/P \
• Dont forget to attach the PO Line receipt to the voucher also!
• Click Add
• This secures the three-way match.

Finally, pay the voucher with an AP Payment, apply the debit memo to mark the voucher as paid and close the AP payment.

• Create an AP Payment worksheet to clear out the payable from the voucher.
• Because this item was already paid for via the prepayment, this will be a $0.00 payment. To achieve this $0.00 payment, you need to apply the debit memo we created.
• First, scroll down the AP Payment worksheet and find your voucher with the amount you put and select it to close out its payable. (It may need to be approved first in order to show up on this list.)
• Then, select the Debit Memo to apply as payment toward that invoice voucher.
• Then, click Mark As Paid to close the AP Payment worksheet.

• Click Ledger on the AP Payment. \

• GL activity:
  • DB A/P
  • CR A/P \
• Notice the GL impact is a net zero posting. \

To summarize, the GL impact of our vendor prepayment was as follows:

• Upon processing the prepayment,
  • DB Prepaid Inventory
  • CR Cash/Credit \
• Upon receiving the inventory,
  • DB Inventory
  • CR Accrual \

• Then, update the previous voucher to remove DB Prepaid Inventory split and replace it with DB Accrual to clear the accrual balance. \

• The final balance resulting from vendor prepayment is:
  • CR Cash/Credit
  • DB Inventory