This article is relevant if you are looking for a better to track your NetSuite vendor prepayments.

Background

A vendor prepayment is effectively a deposit paid to a supplier prior to receiving the goods and services.  The primary concern I see our clients express is the visibility and status of the vendor prepayment on a respective purchase order.

NetSuite’s Help document, as well as two other NetSuite partners (here and here), suggest a practice where you write a check against a clearing general ledger account and then issue a vendor credit against the clearing account to later be applied to a bill.  I think it is cumbersome and it does not take care of my client’s concern.  I see a better way.

Practice Using a Positive and Negative Vendor Prepayment Item

The practice emulates our “Customer Deposit” functionality (version 1.0) and requires no scripting.  You can set this up with these basic instructions.

Addendum

We have automated this process and it is available as a no-cost NetSuite bundle.

Setup a Vendor Prepayment Item as “Other Charge for Purchase or Resale”

Setup a new vendor prepayment item as type “other charge for resale”.  I recommend pointing the expense account to a Prepaid Expense because when you pay the vendor prepayment, you are effectively holding a prepaid asset.  Next, I recommend turning off the “Can be fulfilled” preference checkbox so that the item does not participate in item receipt functions.

Create Purchase Order and Produce Two Vendor Prepayment Lines

Create your purchase order as normal and get the total.   If the vendor requires a 50% prepayment, then create a Vendor Prepayment line for .5 or 50% of the total.  Create another (duplicate) Vendor Prepayment line for the same amount but this time, make the rate (not quantity) negative.  Click on the image to get more detail (note, the images mislead as they show negative quantity; further testing shows that a negative quantity will not come forth right on the vendor bill; thus use a negative rate).

Generate a Bill Prior to Item Receipt for the Positive Prepayment

When you click the Bill button on the Purchase Order, the Vendor Prepayment line will show up automatically (convenient).  Pay the bill like you would any other Accounts Payable function.  This will record a prepaid expense and it is connected to the purchase order.  Now, if you go back to the Purchase order, you will see the counters that indicate the status of the vendor prepayment.   Click on the image to get a detailed example.

Receive Items and Bill Negative Prepayment

Receive your items via item receipt as you would normally.  Then, when it is time to vouch the vendor bill, the Purchase Order will automatically bring the lines representing the goods or services.  The negative prepayment line will automatically take the value down on the bill netting it to the amount actually due.  Click on related image to see it in action.

Vendor Prepayment Control

By using a saved search that keys on your Vendor Prepayment item (posting equals true), you can create a Sublist that links off the Vendor record.  Craft your saved search to show a total.  Using the sublist, you can quickly see all the transactions that reference the Vendor Prepayment Item.  Using more advanced saved search features, you can summarize all the Prepayment items to show the vendor’s net position.  Finally, by summarizing and grouping on the “Created From” (the purchase order), you can see your position on each Vendor Prepayments to see if any payments are still outstanding.  Click on image for more detail.

Get Expert NetSuite Help

The NetSuite platform is very good at being a general purpose ERP system.  Because of the platform, you can adapt NetSuite to meet your requirements.  The intersection of accounting, business operations and NetSuite based software development is my firm’s core competency.    Perhaps you face some challenges that you suspect could be solved with the right professional.  If so, let’s have a conversation.

Marty Zigman

Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.

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