How to allocate customer payments to invoices

To allocate a customer payment, link it to the open invoice it pays and enter the amount. A partial payment leaves the rest outstanding until the next payment is allocated to the same invoice. Auto-Match suggests matching invoices from the payment's reference or amount.

Recording that money came in is half the job. Until a payment is linked to an invoice, the invoice still looks unpaid and the money looks like spare cash. Allocation is the link between the two, and it is what keeps your list of unpaid invoices honest.

The situations you will meet

The last row matters more than it looks. When a transfer arrives with no reference, a quick message to the customer beats a guess. Asking customers to quote the invoice number on every transfer saves the most time of all, and a remittance advice from them settles any doubt: what payment receipts and remittance advice are for explains the difference between the two documents.

Allocate a payment to an invoice on a Mac

Start from the invoice. These steps assume the customer's payment is already recorded; how to record a payment on Mac covers that part.

1. Open the invoice. Open the finalized invoice and click its Payments tab.
2. Click Record Payment. Click Record Payment in the toolbar; it appears for an invoice that is finalized, not void and not fully paid.
3. Choose the payment. Under Select Payment, pick the customer's payment. The list shows that customer's payments that have not been allocated yet.
4. Check the amount. The Allocation Amount fills in with the smaller of the payment and the amount still outstanding on the invoice. Max does the same if you changed it. Set the Allocation Date, and add a note if it helps.
5. Save. Click the checkmark button (Allocate payment). The allocation appears on the Payments tab, and the invoice's outstanding amount goes down.

For a partial payment, that is all: the rest of the invoice stays outstanding. When the customer pays the balance, record the new payment and allocate it to the same invoice the same way.

If the customer simply paid the whole invoice, Paid In Full next to Record Payment creates a payment for the exact outstanding amount and allocates it to the invoice in one go.

Let Auto-Match suggest the invoice

You can also start from the payment. On a Mac, open the customer payment and click its Allocations tab. When it opens, Auto-Match looks for open invoices that fit the payment:

• By reference. An invoice whose number or buyer reference matches the end-to-end ID on the payment.
• By amount and date. Failing that, an invoice for the same customer whose outstanding amount is within 1% of the payment and whose due date is within 30 days of it.

Each suggestion shows the invoice, its Outstanding amount, the amount to Allocate, its Method and Confidence. Check the line, adjust the amount if needed, and save with the checkmark button (Save allocation changes). The payment's sidebar shows what is Allocated and what is Unallocated.

A suggestion is a suggestion: if the confidence is low or the invoice looks wrong, don't save it, and allocate from the invoice instead.

On iPhone or iPad

Open the customer payment, tap the ⋯ menu at the top, then Allocate. The Allocate Customer Payment sheet shows the Auto-Match suggestions, each with an Allocate amount you can change, and the payment's Unallocated amount. Save with the checkmark. Recording the payment itself is covered in how to record a payment on iPhone or iPad.

When an allocation is wrong

Allocated a payment to the wrong invoice? On the invoice's Payments tab, reverse that allocation and give a reason. The amounts are restored on both the payment and the invoice, and you can allocate the payment again. If the invoice itself was wrong, correct it with a credit note rather than leaving a payment hanging: see when to issue a credit note.

Good habits

• Allocate the same day. A payment matched while you still remember the call or the email takes seconds; one matched a month later takes detective work.
• Leave nothing unexplained. If a payment does not fit any invoice, ask the customer before you allocate it.
• Start with the oldest invoice. When a customer pays without a reference, their oldest open invoice is the usual place to start, but confirm it with them.

Frequently asked questions

What does it mean to allocate a payment?

It means recording which invoice a payment pays, and how much of it. The invoice's outstanding amount goes down by that much, so your list of unpaid invoices stays accurate.

How do I record a partial payment on an invoice?

Allocate the payment to the invoice for the amount you received. The rest stays outstanding, and the next payment from the customer can be allocated to the same invoice.

Can a payment's bank reference suggest the invoice?

When a payment's end-to-end ID matches an invoice's number or reference, Auto-Match suggests that invoice. Matching payments straight from bank statement files is a topic of its own, covered in matching bank statements to invoices.