What is a payment on account?
A payment on account is an incoming payment recorded against a customer or supplier account without being allocated to a specific invoice. It is used when the account can be identified but the payment cannot yet be matched reliably with the correct outstanding item or items.
The payment appears as an open credit on the account. It can be allocated and cleared later when the missing remittance information or other evidence becomes available.
When is a payment posted on account?
This treatment may be used when:
- The customer is known but invoice references are missing
- A lump-sum payment covers many invoices
- The remittance advice has not yet arrived
- The payment amount does not match the expected items
- A deduction or dispute needs investigation
- The organisation deliberately receives an advance payment
Example: A customer pays £50,000 and the bank reference identifies the customer, but no invoice list is provided. Finance posts the amount to the customer account and clears it later when the payment advice arrives.
How is a payment on account handled in SAP?
A payment on account reduces the customer’s net balance, but the original invoices remain open. This can mean:
- Individual invoices continue to appear overdue
- The account contains an unallocated credit
- Collections teams need to consider both open invoices and payments
- Accounts receivable ageing may require careful interpretation
Payments on account should therefore be reviewed and allocated promptly.
How is a payment on account different from a partial payment?
A partial payment is usually linked to a specific invoice but leaves that invoice open. A payment on account is not allocated to a specific item when it is posted.
It is also different from a residual item, which clears the original invoice and creates a new open item for the remaining balance.
How are payments on account cleared?
Once the correct invoices are known, the payment and related receivables can be selected and cleared in SAP. If a difference remains, finance may need to apply a residual item, partial payment, reason code or another approved treatment.
The BEST Customer Clearing module supports remittance matching and customer clearing within SAP. It can help allocate lump-sum payments across multiple open receivables while retaining exceptions for review.
Frequently asked questions
Is a payment on account the same as an advance payment?
Not always. An advance may be intentionally received before an invoice exists. A payment may also be posted on account temporarily because its intended allocation is unknown.
Does a payment on account clear overdue invoices?
No. The invoices remain open until a later clearing transaction allocates the payment to them.
Can a payment on account remain open at month end?
It can, but aged or material unallocated payments should be investigated and documented under the organisation’s control policy.