Purchase Add-On Method: Partially Prepaying a Vendor with a Rate of Percent

The Purchase Add-on Charge method may be used for handling partial Vendor Prepay.

Note: This situation is designed for those who do not intend to pay the remainder of their Vendor contracts until shipment is received. In this scenario, the Rate will be set to Percent.

Setup

Set up Purchase Add-on Charges at Accounting / Setup / Inventory / Purchase Add-on Charges. Select Add to create a new Purchase Add-on Charge. 

1. Enter the ID and Description for the Add-on Charge and select the appropriate Rate type and bill type. 
2. Select a Rate type of Percent. This may be edited on the Purchase Order depending on the type of prepaid contract. 
3. If a Classification is selected, the Add-on Charge defaults onto any line item containing a Product with a matching Classification. 
4. Select the Included in Vendor’s Bill option to influence the amount paid.

Scenario

The following scenario involves fertilizer ordered on a Purchase Order at $400 per ton with a 25% down payment at the time of the order. The remaining 75% balance will be due upon invoice. 

1. Add a Purchase Order at Accounting / Inventory / Purchase Orders.
2. Select the Prepay option on the Add A Purchase Order window.
3. Select the Product and set the $/Unit to $400 per ton.
   
4. Double-click in the Add On column to open the Purchase Add-on Charges window.
5. Double-click on the Charge ID column heading and select the appropriate Purchase Add-on Charge.
6. Set the Rate as the unpaid percent. In this case, 75% is entered as a positive (75) on this line. Set the Calculate As type to Percent. Do not select the P checkbox for Prepay on this line.
7. To add the second line for this add-on, double-click the Charge ID column heading again and select the same purchase add-on charge.
8. Set the Rate as the unpaid percent. Here, 75% is entered as a negative (-75). Set the Calculate As type to Percent. Select the P checkbox for prepay on this line.
9. Select Calculate. Each add-on charge row now displays the Charge $ to apply to the Vendor’s Bill, $15,000, positive and negative respectively, which is the total amount due to the Vendor upon delivery. The Add-on charge has a negative line valued at - $15,000 which reduces the amount saving the PO will increase the balance by to $5,000. When the PO is invoiced, the line will come in as Prepaid in full. The positive $15,000 line (not prepaid) as the company will owe this amount when the invoice is saved.
   
10. Select Save to return to the Purchase Order.
11. Select Apply. The Purchase Order now displays the Product at the contracted price of $400/ton, with a $Total amount of $20,000. The total of the Purchase Order is $5,000 which is the prepaid amount.
    The Purchase Order can now be received against as normal. As Purchase Receipts are entered against the PO, the Add-On Charge follows through based on the Purchase Order set up and quantity received. The Purchase Receipt can then be imported into a Purchase Invoice. The Add-On Charges set up on the Purchase Order follow through the Purchase Receipt into the Purchase Invoice.
    Note: If the Purchase Order is not applied to the Purchase Receipt, the Add-On Charge will not flow through but can be re-entered at the time of Purchase Invoice.
12. For this example, a Purchase Receipt was entered for 26 tons of fertilizer. The Purchase Invoice now shows 26 tons of product has been received and invoiced against the Purchase Order. The Purchase Order shows 25% prepaid per ton so the prepay is correctly reduced by $2,600. This leaves a balance due of $7,800 when saving the invoice. The product cost has been updated by $400/Ton.