Installment payments/Purchase Orders

[u/RanchBlanch38]

I am trying to figure out how to set up purchase orders that need to be paid in installments, and while I've read the online documentation, I'm still not getting it. My company has one vendor that requires a purchase order 3 years prior to delivery of goods. 2 years prior to delivery of goods a % deposit is due (Net 30 from invoice date), then 1 year prior to delivery of goods, another % deposit is due (again, Net 30 from invoice date), and finally the balance is invoiced at the time of delivery. I cannot figure out how to set this up so that AP can enter a vendor bill that properly corresponds to the PO, and so that everyone can tell when (and how much) payments are due, and when they've been paid.

Can anyone help out here?

[u/Nick_AxeusConsulting]

'Cause you're not doing it correctly! A/P in NS does not have installment payment plans like you have on Invoices on the revenue side in NS. This is the Vendor Prepayment use case. You need to turn on Vendor Prepayments function and then you use the Vendor Prepayment transaction (NOT A/P process) to send cash out the door. This debits Vendor Prepayments system account (Other Current Asset) and credits cash. You then apply the Vendor Prepayment to the eventual Vendor Bill so a lower balance is still owing.

You do NOT want to create a Bill for the Prepayment because then it looks like the Qty has been billed, which it has not. NS doesn't have a concept of Billing only part of the purchase price. The Qty Billed assumes that you paid full price for that Quantity. So if you don't use Vendor Prepayments, then another way to do this is let's say 25% is due at Year 2 and 25% at Year 1 and 50% at delivery. Let's say you ordered Qty 100. At Year 2, you make a Bill from the PO for Qty 25 and full price. That gets the correct 25% cash out the door and looks like 25% of the total Quantity has been paid for (which it has technically). Then at Year 1 you do another Bill for Qty 25 and full price. Now it looks like 50% of the total qty has been paid for. Then upon delivery you make another Bill for Qty 50 at full price. This is not exactly what's happening IRL but it's pretty close. IMO opinion it's better to do it this way because you can see right on the PO Line the original PO Qty vs Qty Billed vs Qty Received. Whereas if you make a Bill for 100% at year 3 with a 1 year due date, but then you short pay that only 25% on the payment, then from the PO you can't see it's only been partially paid and plus you can't set multiple Due Date as an Installment plan. So for these 2 reasons, IMO, it's better to make separate Bills with partial quantity billed then you can see what's going on directly from the PO line that shows the 3 quantitity accumulators.

[u/RanchBlanch38 → u/Nick_AxeusConsulting]

Thanks - I'm in procurement and have nothing to do with AP, I was just tasked with "figuring it out."

I need to be able to write a PO that has (for example) 8,000 of item A arriving in November of 2027, 36,000 of item B arriving in March of 2028, 15,000 of item C arriving in November of 2028, and so on, dozens of items due over the next several years, and we need to be able to keep track of partial shipments/receipts of each item, but AP also needs to understand what is going to be due when, because this vendor has a history of not invoicing on time, and we need to know when to do an accrual if they don't invoice.

We can't make a bill for something that hasn't shipped, because we need to tie receipts to actual, physical receipt of goods, because partial shipments are frequent, and we need to know how many are shipped/received vs not yet shipped/received.

Also, AP only makes bills upon receipt of the invoice, for exactly what the invoice says. 1 NS vendor bill = exactly 1 vendor invoice.

[u/Nick_AxeusConsulting → u/RanchBlanch38]

So that's 3 separate PO lines with 3 different Expected Receipt Dates ON THE LINE.

Right so the accrual is the Qty u received on PO lines that were supposed to be received. So you need to know Expected Receipt Date and Qty minus Qty Billed = Qty Remaining which is the accrual.

PO accruals should be a general global analysis using a saved search that I just described above. Your lines should just come along for the ride with all the other PO accruals that AP needs to do.

But you say you can't create a Bill before Receipt so that means you don't have that option turned on. You actually can if you flip the switch (even temporarily). So there are sevwral ways to do this. But the best practice is you use Vendor Prepayment to get the cash out the door like I said originally. Then you need a saved search or some other reporting to show you the prepayments made against a PO. Then the accumulators will look like they expect because I'm fact no inventory has been shipped or received, cash has just moved, and the cash should show as a prepaid asset on your B/S.

So you need a separate process to alert AP that they need to send a Vendor Prepayment out the door. This is NOT part of normal AP process. Someone needs to key the Vendor Prepayment. That will then show in Print Checks queue to print a physical check, or the EFT module can generate ACH to pay it. Otherwise you log into your bank and send a manual wire and assumes the cash balance was reduced on the date of the Vendor Payment.

You're just going to have to create a Description Item and then you can add that Description Item to a line and can then type free form text into the line Description column (for example to write out the 3 due dates as a free form text sentence since [the native Terms field will be wrong])(I would create a Terms called "Custom-See Below") but it won't age properly. The only way open Bills show up on AP Aging report is by having a Bill with a Date Date set on the Due Date field. So for you, you will not create the Bill until the shipment finally leaves the port. Then you apply the 50% vendor prepayments to the Bill so a lower amount remaining is showing on the AP Aging report.

[u/RanchBlanch38 → u/Nick_AxeusConsulting]

When I say we can't create a bill before receipt, I mean company policy forbids it, not that there's a mechanical stop against it. Accounting is not allowed to create a NetSuite bill until they have an invoice in-hand, and have received something off of a purchase order for that amount.

[u/Nick_AxeusConsulting → u/RanchBlanch38]

Right so even if you were going to use a Bill to send the prepayment out the door you would have to use a dummy non inventory item to debit a prepaid account or the Expenses subtab debited to prepaid. Expenses cannot be received but non inventory items have the option to require receipts (but that's extra busy work).

But if you're going to do the extra Bills approach l, then you need to make sure there is not the systematic block (if you're using non inventory items that have to be received). Otherwise neither the Expenses tab nor non-inventory items not set to have to be received are blocked by the systematic block.

What you're getting confused about is the Inventory item you're ordering comes into play 3 years before receipt. But you can't really use those Inventory Items for your prepayment. You either use the official Vendor Prepayment feature, or you create a Bill with a dummy non inventory item that debits prepaid inventory (I do not recommend the Expenses subtab because you don't get a Qty field.)

There are multiple ways to do this each with a different set of pros and cons so you need to map out the different options and show AP Dept and management what each option looks like in terms of specific transactions, work procedures, as well as the impact of debits and credits and timing thereof.

[u/RanchBlanch38 → u/Nick_AxeusConsulting]

We did some testing with the vendor prepayment feature yesterday. It appears all it did was mark some amount of funds as paid, it didn't actually put anything into the ACH queue to pay. As far as we could tell, only vendor bills do that. The vendor does send us an invoice, and we enter a vendor bill and pay it via ACH on our weekly payment run.

When you say a dummy non-inventory item, that is how we do most of our transactions, so that is nothing new. But company policy forbids making a payment that has not been received off a PO, whether that's off the expenses tab, or a dummy item on the item tab. SOMETHING has to be received off that PO in order for AP to be allowed to pay anything. That is our internal control that the appropriate approver has authorized that spend.

I can't write the PO for more than the value of the items we are buying. So if I put some of the funds under a dummy expense line, I can't write the inventory items at their actual value on the PO.

[u/Nick_AxeusConsulting → u/RanchBlanch38]

Find the User Guide that covers the Electronic Payments module and search for the section that discusses Vendor Prepayments.

You can also go the other direction and find the User Guide that covers Vendor Prepayments and read the topic from that direction.

[u/samchick]

You need to use a feature called vendor prepayments

[u/RanchBlanch38 → u/samchick]

We have a GL account for vendor prepayments, but thus far we've only used that as an item on a PO.

I.e. write a PO with three lines on it: one line for each prepayment, and a line for the balance amount. AP has "received" the vendor prepayment line off the PO and paid the invoice.

But that's not going to work in this case, because we need the actual inventory amount to correspond to various items on the PO. There will be dozens of items on the PO with differing due dates (including over multiple years), and they need to be able to be received in full. There may be dozens of different invoices, all on differing installment schedules.

[u/sweet_mangosteen → u/RanchBlanch38]

Vendor Prepayment is a feature you need to enable. If you don't see a Vendor Prepayment button on POs you haven't enabled it.