Advance Invoicing Methods

Introduction

This document provides an overview of advance invoicing methods and identifies the business scenarios in which each method is most suitable.

The advance invoicing method is determined by the 'Adv Invoicing' setting on 'CO Type. Open' (OIS010/K).

Alternatives 3, 4, and 5 are only applicable when combined with a payment term where 'Payment prop' is selected in 'Payment Term. Open' (CRS075). For other payment terms, advance invoicing cannot be used.

Method 1-'Adv invoicing allowed'

Method 1-'Adv invoicing allowed' is primarily intended for scenarios where an advance payment is required but no connection to production, purchasing, and logistics (in M3 BE) is necessary. The goods can be delivered without having received the advance payment. The advance invoice is a legal document, updated to the Accounts Receivable, and must be paid before the delivery invoice.

Method 2-'Prepayment req allowed'

Method 2-'Prepayment req allowed' is mainly intended for scenarios where an advance payment is requested, but it is uncertain whether you will pay or what amount will be paid. A prepayment request is a letter asking for money. The prepayment request is not a legal document and does not update the Accounts Receivable. There is no connection to production, purchasing, and logistics (in M3 BE), so the goods can be delivered without having received any advance payment.

Method 3-'Adv invoicing allowed. Prepaym calculated'

Method 3-'Adv invoicing allowed. Prepaym calculated' is mainly intended for scenarios where goods are to be acquired (purchased or manufactured) on your behalf. The acquisition order proposal is not to be released unless you pay an advance (against an Advance Payment document). You can select not to pay, hence selecting not to proceed with the purchase. Once the goods are available, a Payment document is printed, and the remaining amount must be paid for the goods to be released to you. The Advance Payment document and the Payment document are not legal documents and do not update the Accounts Receivable.

Method 4-'Prepayment required'

Method 4-'Prepayment required' is mainly intended for scenarios where the goods are available for immediate pick-up as soon as you pay. You can select not to pay, hence selecting not to proceed with the purchase. The printed Payment document is not a legal document and does not update the Accounts Receivable.

'CO Delivery. Close Payment Proposal' (OIS952)

Since methods 3 and 4 are intended for processes where you can select not to proceed with the purchase, there is a job 'CO Delivery. Close Payment Proposal' (OIS952) that closes the customer order lines and removes any unpaid payment documents.

Method 5-'Deposit'

Method 5-'Deposit' is mainly intended for scenarios where goods are to be acquired on your behalf.

The acquisition order proposal is not to be released unless you pay the deposit. However, payment before delivery is not required in this solution. There is no system support to prevent goods from being released to you without receiving payment. The solution is, however, designed to be used in a scenario where payment is made at the same time as the goods are released to you. This is supported by the possibility of invoicing at the same time as releasing the goods for delivery and by integration with the cash desk solution. An automatic release for delivery is prevented, and you must do the manual release from 'Customer Order Deposit. Open' (OIS157) or 'Customer Order Deposit Lines. Open' (OIS158). So even though there is no so-called hard prevention, the design of the solution allows for the so-called soft prevention.

Method 5 is also suitable for scenarios where the goods are available for immediate pick-up as soon as you pay. The difference from method 4 is that there must be an agreement to proceed with the purchase since the printed document is a legal document (an invoice). Method 5 is the only advance method that applies the item's VAT code to the advance payment calculation. If the deposit is for items with different VAT codes, the payment of the deposit creates an advance invoice per VAT code to ensure correct VAT reporting.

A comparison of advance invoicing solutions key characteristics

This table compares key characteristics of advance invoicing solutions:

Methods 3, 4, and 5 are very similar solutions – which do I use?

Methods 3 and 4 are suited for scenarios where no flexibility is needed. They are intended for simple, one-delivery-per-order scenarios. There are no changes to these orders once the payment document is paid. A typical scenario is that you pay in the store, then drive around to the back, show the receipt, and get the goods.

Method 5 offers more flexibility but is not well-suited when it is common that you do not proceed with the purchase, as there is no automatic cancellation of the payment document and closing of the order. This is an issue if the payment is made in a different location from where the order is created since you do not know that the Advance Payment document must be canceled, and the order must be closed.

If Method 5 is used when selling goods that are available (not creating an acquisition order), the printed document is an invoice, which means that you must have committed to the purchase before the invoice is printed.

Method 5 allows for the manual change of the deposit amount per order line, and in case of partial deliveries, the deposit amount is 'consumed' based on exactly what is delivered. That is, if one out of two pieces on an order line is delivered, then only half of the deposit amount for that order line is consumed on the delivery invoice.

Method 5 is the only advance method that applies the item's VAT code to the advance payment calculation. Delivery can be done without a full advance payment.