This article describes an accounting option for prepayments. A prepayment occurs when a tenant pays rent before a charge has been created, for example, they pay rent two weeks early and the system creates a prepayment record instead of a regular receipt.
The Prepay Future Charges Option
The Prepay Future Charges option is intended for clients who report on a Cash accounting basis, and it changes the way income is recorded when a tenant pays a charge early.
In Cash accounting, income is recognized when money is received, i.e. when a receipt is created. In Accrual accounting, income is recognized when you create a charge.
For Cash accounting clients, if a tenant pays a charge early, the income is recognized in the month prior to the charge. Some clients want the income to be reported in the same month as the charge, and this option gives you a way to do that.
Go to the Account Settings tab of the Company Settings screen. Select the Prepay Future Charges option.
Note(s) on Using the Prepay Future Charges Option:
In order for the feature to work as intended, the payment must be made before the charge is created.
The Prepay Future Charges feature cannot be used for tenants with outstanding balances, as the “prepayment” will be automatically applied to the existing unpaid charges and not the intended scheduled charge that is created with Monthly Posting.
Prepay Future Charges cannot be used for one-time charges, only for scheduled charges paid before the charge is posted.
The zero dollar receipt is created when Monthly Posting is run, and is dated in the month of the charge, effectively recording the income for the payment in the month of the charge.
Prepay Future Charges Example
A tenant pays their March rent early, on February 26th.
On February 27th, you post charges for March.
If the option is not selected, the receipt is linked to the future charge, but it hits the financials in the present month. The income is recorded in February, not March.
If the option is selected, the receipt is automatically converted to a prepayment and a zero receipt is created that links the prepayment and the charge in March. The income is recorded in March.