How to manage customer deposits in Xero

• When you do a quote to a client, say it’s a $4k job and the quote says to pay say 50% on acceptance of the quote. You haven’t done an invoice, but have $2k turn up in the bank account you need to reconcile against. In this case you would do a “Prepayment” in the bank rec. Then when you invoice once job is done it will ask you to allocate the credit against the invoice.

• What if the client wants a receipt sent? Not sure if you can do this from the option above?

• You could do an invoice for “$2,000 Deposit for Job” and code it to “customer deposits” in the balance sheet. Then you can allocate the payment against the invoice and send that to client as a receipt. In that situation you’d do a final invoice for say $4k and then have an extra line as a negative saying “less deposit paid” of $2k Coded to Customer deposits.

• Note for all of these situations, GST is payable when you receive the funds, so need to bear this in mind. The only exception to this would be if there is an independent 3rd party involved. Say like in a property sale when the 20% deposit gets held in the lawyer’s trust account.