Introduction - Advance Invoices

An advance invoice bills a customer before the work is done or the goods are supplied.

Taking a deposit, holding it as a liability, and drawing it down.

It collects money against a balance you hold on their behalf, and that balance is then drawn down by real invoices as you deliver. Retainers, deposits and prepayments all work this way.

The Advance Invoices screen. A table lists advances with columns for Date, Advance Invoice number, Reference Number, Customer, Status, Amount, Balance and Created At. Each row shows a Draft status with Balance equal to Amount. — Balance is the part still held. It falls as real invoices draw the advance down.

Why advances are different

Money taken in advance is not revenue. You owe the customer either goods or a refund, so it sits as a liability until you earn it. That is the whole reason this document exists separately from an ordinary invoice, which recognises revenue immediately.

Advance invoiceYou ask for the deposit
PaymentMoney arrives, held as a balance
Real invoiceWork delivered and billed
Apply advanceBalance drawn down

What the balance means

State	Meaning	On the balance sheet
Paid, unapplied	You hold their money and owe them delivery	Liability
Partly applied	Some earned, some still owed	Liability, reduced
Fully applied	All earned as revenue	Cleared
Refunded	Money returned before it was earned	Cleared

The customer record shows the advance balance still held. That figure is a liability, so it should be watched at period end as carefully as any receivable.

Advance against credit note

Both sit on a customer as money in your favour, and they are not interchangeable. An advance is money they paid you before you earned it. A credit note is value you have given back after overcharging. They post to different accounts and mean opposite things about who was wrong.