Zikpro - Payment Entry
Payments are a critical part of the accounting process in ERPNext. They ensure that financial transactions are recorded accurately, enabling businesses to maintain proper cash flow management, track outstanding invoices, and reconcile accounts. ERPNext provides a robust system to manage payments, including creating payment entries, journal entries, and setting up payment terms and modes. These features help businesses streamline their payment processes, reduce errors, and maintain compliance with accounting standards.
1. Key Components of Payment in ERPNext
The payment process in ERPNext involves the following components:
2. Payment Entry
A Payment Entry shows that a payment has been made for an invoice.
You can make a Payment Entry for:
Sales Invoice
Purchase Invoice
Sales Order (Advance Payment)
Purchase Order (Advance Payment)
Expense Claim
Internal Transfer
In ERPNext, there are two ways to record payments:
Payment Entry (Default option)
To open the list of Payment Entries:
3. Things Needed Before Payment Entry
You can also make a Payment Entry first and link it to an order/invoice later. But before using it, make sure to create:
Supplier
If you’re using the Sales or Purchase cycle, you also need:
Sales Order (for advance)
Purchase order (for advance)
Purchase invoice
Set these up first:
ERPNext Company Setup (to set default accounts)
4. How to Create a Payment Entry
After submitting a document like an invoice or order, you’ll see a Payment button under Create.
Steps:
1. Series: This is merely the structure your payment entry will have so it remains easy to read.
Example: In the picture, you see: ACC-PAY-.YYYY. That means every entry will begin with "ACC-PAY-", followed by the year (such as 2025), and a different number such as 0001, 0002. The system does this part automatically.
2. Payment Type: This is where you indicate to the system what type of payment you are making.
Example: In the picture, "Receive" is chosen. That is, the company is receiving cash from someone (perhaps a customer).
You can also select:
Pay: when the company is paying money (such as paying a supplier).
Internal Transfer: when you're transferring money between your own accounts (such as from bank to cash).
3. Posting Date: This is the date you would like the system to enter this payment.
Example: In the picture, it's 19-06-2025. So, the payment will be reflected as completed on that day in the accounts of the company.
4. Company: Here you choose the company you're making this payment on behalf of.
Example: In the image, it is alpha (Demo). That's simply the name of the demo company we're using. If you had more than one company, you'd pick the correct one here.
5. Mode of Payment: This is the method through which money is being paid or received.
Example: In the image, it is Cash. So the business is being paid in cash by someone. Alternatively, you might take payment by bank transfer, cheque, credit card — whatever you choose.
6. Party Type: This informs ERPNext whom you're transacting with — a Customer, Supplier, or perhaps an Employee.
Example: Customer. That indicates the company is being paid by a customer.
7. Party: This is the name of the individual or firm that you're paying or receiving payments from.
Example: Palmer Productions Ltd. This is the actual customer paying your company.
7. Party Name: This field will typically auto-fill and validate the name of the party selected above.
Example:: Palmer Productions Ltd. It's just matching the "Party" field to keep things consistent.
8. Company Bank Account: This is the company's bank account which will be used to receive or make the money.
Example: Imprest - Standard Chartered. Here, therefore, the company will utilize its account at Standard Chartered to make the payment.
9. Party Bank Account: This is the name of the other person or company (the supplier or customer).
Example: ABC Account - Royal Bank of Canada. This informs you where the funds are coming from (or going out to), based on type of payment.
10. Contact: This is where you can insert the name of the person you're communicating with from said company.
Example: You may put in the name, phone, or email of the individual if necessary — useful for follow-ups or contact.
4.1. Create Payment Entry Manually
If you create it manually, it won’t be linked to any invoice/order at first. You can match it later using the Payment Reconciliation Tool.
Go To:
Choose the Payment Type (Receive, Pay, or Internal Transfer).
Party Type: Select the type of party (Customer, Supplier, or Employee).
Party: Select the specific party (e.g., customer or supplier name).
Payment Amount: Enter the amount being paid or received.
Account: Select the account (e.g., Bank Account or Cash Account).
Payment Date: Enter the date of the payment.
Under the References table, allocate the payment to a specific invoice or order (if applicable).
Click Save and submit.
5. Features
5.1. Set Mode of Payment
Mode of Payment means how the payment was made. For example Bank, Cash, Wire Transfer, etc.
5.2. Payment From / To
5.3. Payment Party Details:
1. Party Type: This is where you specify the kind of person or company participating in the payment. In the above image, it's Customer, which means the company is being paid by a customer.
2. Party: This is the name of the person or company you are transacting with. Here, it's Palmer Productions Ltd., which tells us that they are the customer paying.
3. Party Name: This will be automatically filled once you've chosen the party. It certifies the complete name, and in this instance, it duplicates Palmer Productions Ltd.
4. Company Bank Account: This is the bank account your business will use to get or send money. The above photo displays Imprest - Standard Chartered, so it means the money is going into or out of this bank.
5. Party Bank Account: This is the other party's bank account. It's ABC Account - Royal Bank of Canada, Palmer Productions' account, in the picture.
6. Contact: This option is used to type in the customer or supplier's person name. It's empty in the picture, but if you need it for communication or follow-up, you can type in a person's name here.
5.4. Account Details
1. Party Balance: The overall amount receivable or payable from Customer or Supplier from Invoices set in the current Payment Entry. Paid amounts will be positive and if advance payments are made, they will be negative.
2. Account Paid From: The Account from which the amount will be deducted when Payment is submitted.
3. Account Currency: The Currencies of these accounts will be fetched as set in the Account and cannot be edited here. To know about more about transactions in multiple currencies, visit this page.
4. Account Paid To: The CoA account from which the amount will be added when Payment Entry is submitted.
5. Account Balance: The total amount balance from all the invoices of the selected accounts.
6. Paid Amount: The total amount paid for the current Payment Entry is shown in this field.
- Company form.
- Mode of Payment default account.
- Customer/Supplier’s default bank.
- Select manually.
5.5. Reference – Link Invoices
1. Get Outstanding Invoices:
Click Get Outstanding Invoice after entering the amount. It fetches all unpaid invoices and open orders for that party. You can select a date range, too.
2. Partial Payments
If the full amount isn’t paid, enter how much was paid in the Allocated field.
If the Party has not made full payment, enter the amount paid in the 'Allocated' field.
If creating Payment Entry for a Customer, the Payment Amount will be allocated against a Sales Invoice. On the same lines, when creating Payment Entry for a Supplier, Payment Amount will be allocated against a Purchase Invoice.
3. Payment Reference Table
Type: Whether the payment is being made against a Sales Order, Sales Invoice, or a Journal Entry.
Name: The particular transaction ID is fetched/selected here.
Total Amount: The total amount of one Invoice/Journal Entry in the row.
Outstanding: The amount to receive/to pay for this invoice.
Allocated: If the Paid Amount is less than the total invoice amount, only that paid portion will be applied to the invoice(s) selected in the Payment Entry. Payments can be made in parts. For example, if there are three invoices worth 20 each and you pay 60, the amount will be split equally. Sometimes, Payment Terms may also affect this.
5.6. Unallocated Amount
When a Payment Entry is created in ERPNext and the Paid Amount is more than the total invoice amount, the extra amount is stored in the Customer's/Supplier's account as 'Unallocated'. This unallocated amount can be used for future invoices.
For example: If you create a Sales Invoice for 1,000 and the Customer pays 1,500, the extra 500 stays in their account. Later, when you create another invoice for 1,000, that 500 can be used.
5.7. Deductions or Loss
When a Payment Entry is made against an invoice, sometimes there is a difference between the actual Paid Amount and the invoice’s Outstanding amount. This can happen due to rounding differences or currency exchange rate changes.
Why? Several reasons:
A rounding difference (such as 0.01 or 0.05 rupees more or less).
A currency exchange rate fluctuation if you are working in foreign currency.
Rather than leaving the entry unmatched or incorrect, ERPNext provides you with a method of dealing with it. You simply need to instruct the system to use which account for this minor deviation — normally a "Round Off", "Exchange Loss", or "Write-off" account.
Assuming you have a customer invoice of Rs. 1,000, but the customer pays Rs. 999.95 because of currency conversion.
Now you're short by Rs. 0.05.
Rather than leaving it outstanding as unpaid, you can:
Select an account such as "Exchange Gain/Loss" or "Rounding AdjustmenT."
ERPNext will make that Rs. 0.05 posting to that account.
Your invoice will be completely marked as Paid, and your books remain clean!
5.8. Write Off
A write-off happens when the Paid Amount is less than the amount that was to be allocated. This means the remaining balance is treated as a loss — maybe due to small charges or because the amount will not be recovered. This is recorded as a loss.
5.9. After Submitting
Click Save and Submit. After submission, the unpaid amount in invoices is updated.
If paid for Sales or Purchase Order:
Field Advance Paid is updated. When you create an invoice from it later, this advance payment will be shown automatically.
For receiving money (Customer pays):
Debit: Bank or Cash Account
Credit: Customer (Debtor)
For paying money (You pay Supplier):
Debit: Supplier (Creditor)
Credit: Bank or Cash Account
6. Handling Unique Situations Relating to Payment
Before any payment has been made, the outstanding amount is equal to the grand total. This amount decreases when a Payment Entry is processed.
Billing and payments occurring simultaneously is the exception, not the rule. Payments can occur in numerous ways, both for Sales and Purchases, such as:
100 percent payment in advance.
Full payment after shipment, either during delivery or shortly afterwards.
Part payment before shipment, with the rest due on or post-delivery.
Payment that settles several invoices at once.
Prepayment that can be apportioned over several invoices.
ERPNext supports all these payment methods. Each individual transaction (GL Entry) can interface with a Sales Invoice, Purchase Invoice, or an Advance Payment Invoice (for payment made before services are rendered). In some extraordinary circumstances, invoices can even be generated via a Payment Entry.
The balance due against an invoice is computed from all the linked accounting entries, which facilitates the splitting or consolidating of payments using the Payment Entry mechanism.
7. Payment Entry versus Journal Entry
Completing a journal entry requires a basic understanding of two concepts – which account to debit and which to credit. With Payment Entry, no such concepts are required since all these aspects are taken care of automatically, making the Payment Entry more user-friendly.
Payment Entry is more suitable for dealing with transactions in foreign currencies. You are also able to print cheques from Payment Entries directly.
Nevertheless, Journal Entries serve purposes such as:
Capturing opening balance.
Tracking depreciation of fixed assets.
Modifying credit notes (for sales) and debit notes (for purchases) when no payment has been processed.
8. Payments with Journal Entry
The following actions must be done when you want to pay through Journal Entry:
1. Provide access to this feature: Under Accounting, click Accounting Masters, then Accounts Settings, and tick the 'Make Payment via Journal Entry' checkbox.
2. Executes the payment: After an invoice has been attendant, click the Create and select Payment.
Proceed to make the payment by preparing the journal entry, after which you save and submit it.