This article is relevant if your NetSuite-powered organization takes retainers, money-in-advance, or customer deposits.

Background

Too many times, I have had prospective clients come to our firm asking for help with concerns related to accepting payments.
The classic rookie configuration mistake is to use cash sale records to record payments from eCommerce sales — we now have a serious revenue recognition problem. Cash sale transactions are akin to point-of-sale retail transactions in that we are tendering goods or services to the customer while simultaneously settling payment.

In eCommerce sales, we are accepting orders but need time to fulfill them.  If we accept money up front but have yet to fulfill, we should not use a cash sale record as it will assume we have earned our revenue.  Instead, the customer deposit record is perfect for recording the funds because it properly sets up that we have a liability (sometimes called unearned revenue).

Many businesses desire/need to accept funds upfront before they will start to fulfill.  NetSuite’s customer deposit is the candidate record to indicate funds have arrived. Yet, it suffers from an important weakness.  How do we formally make a request for funds in advance of fulfillment?

Getting in Front of NetSuite Customer Deposit Logistics

Since 2016, we have been the leader in solving NetSuite customer deposit accounting. The major situation we solved is the ability to use NetSuite’s accounts receivable system to properly request funds in advance of delivery. Please see, Solved: NetSuite Customer Deposits and Advance Payment Accounting.

To have funds disbursed from another company, we typically need to go through that organization’s accounts payable department.  Most accounts payable organizations are very comfortable processing customer invoices.  Thus, if we can present an invoice to the company for which we need funds, the familiar invoice document generally lubricates the process.

The “just get it done” approach to generating a customer deposit request record to look like an invoice is to take a sales order and format it to look like an invoice using NetSuite Advanced PDF technologies. Yet, the challenge with the approach is that there is very little tracking — it’s similar to using Word or Excel to generate the request documents offline, but better because it saves time and is less error-prone.

Instead, why not have customer deposit accounting be as simple as all of our accounts receivable activities?  This way, as cash in any form arrives, we apply it against open invoices.  Our bookkeeping processing becomes simplified with lower administration costs.  And, we can use the accounts receivable system and aging reports to help us project future inbound cash, earned or unearned.

Drive Customer Deposit Records from any Record

Since 2016, after we solved the advance customer deposit request accounting as described in this 2016 article, multiple deposit request models have emerged. Let me enumerate the ones we see most frequently:

1. Sales Order: the most common is that we have an order and we need customer deposit funds to start to fulfill.
2. Estimates/Quotes: we send out a quote but need funds to begin. Here, when funds arrive, we automatically convert the estimate to a sales order. See my 2017 article, Create NetSuite Customer Deposits from Opportunities or Estimates.
3. Opportunities: just like the estimate/quote, some organizations use Opportunity records to manage their sales processes. These records are effectively the same estimate/quote pattern and can be treated nearly the same.
4. Projects: here, the concept of projects can be more complex. The major point is that project-based fulfillment time horizons are typically milestone oriented and thus longer in duration. See my 2019 article, Generate Customer Deposit Request Invoices on NetSuite Projects. Note, earlier this year (2023), I discussed how to Drive NetSuite with Alternative Project Concepts.

The major point is that any type of business record can serve as the basis for making a request for advance-of-delivery funds. Thus, we need a flexible architecture to drive and track our customer deposit requests.

Partial Payments on Expected Customer Deposits

Although we may make a request for $1,000 in funds, the payor may partially pay $750. Under the proper model, we can easily accept the $750 as payment toward the $1,000 advance payment deposit invoice and the system will generate a linked $750 customer deposit. Accounts receivable will continue to show $250 due.

Finally, from the perspective of the managers on these transactions, they need to be able to quickly tell the overall money situation. In the images supplied (click to enlarge), we illustrate the advance deposit invoice representing the customer deposit request, the payments on those requests, and the actual customer deposits (the real liabilities). Naturally, as we earn revenue through fulfillment, customer deposit amounts are applied. Any unapplied customer deposits represent outstanding liabilities.

Customer Deposit Web Pay Options

Finally, we put this all together in a Web Payment offering. In my 2023 article, Drive Branded Customer Web Payments via NetSuite Integrated Payment Options, we offer a license-free solution to help customers conveniently pay their outstanding invoices. That solution is quite flexible — with invoices representing requests for funds, the web pay options for customer deposits open right up with no extra effort.

See the Customer Deposit Generator in Action

While I have created supporting articles, below are three short videos that demonstrate the Customer Deposit requests and generation.

NetSuite Customer Deposits from Opportunities or Estimates

Generate Customer Deposit Request on NetSuite Projects

Accept NetSuite Credit Card Customer Deposit on Sales Order

Get the Customer Deposit Request Generator

This article is a summary of customer deposit generator capacities that my firm has been working with clients for 7+ years. We provide this software to all of our clients free-of-license charge. We do this because we believe that people don’t want software. They really want what is unlocked by the patterns that software enables. In this case, our clients really seek a scalable capacity to coordinate with their customers for the movement of funds while ensuring they are producing proper accounting. Our firm excels at listening to business ambitions first and then bringing forth all the capacities built-in to NetSuite while leveraging our previous client work to produce the ultimate business situation.  Our clients share that they appreciate our depth and ingenuity to solve real-world business systems challenges.

If you found this article relevant, feel free to sign up for notifications to new articles as I post them. If you are ready to tackle your NetSuite customer deposit logistics, 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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