Dealing with overpayment as a prepayment

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HI experts?

How can I deal with overpayment as a prepayment? How can I do that in the Dynamics 365 business central in two scenario below?
1. Refund money
2. Apply it to (or offset it against) the next invoice.

Could you let us know the documents which explained these use cases.

All the best,
Nobuhara

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Dynamics 365 Business Central

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Ahmad Subhani 618 on at

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Refund Money

Steps:

Create a payment journal to refund the overpaid amount.

Use the same customer/vendor and apply the refund to the original overpayment entry.

Apply to Next Invoice

Steps:

Keep the overpayment open (unapplied) in the customer/vendor ledger.

When posting the next invoice, use the "Apply Entries" action to apply the overpayment.

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Mansi Soni 8,951 Super User 2026 Season 1 on at

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Hello,

In Business Central, when dealing with overpayments, you can handle them as follows:

Refund Money: Post the overpayment as a payment entry in the Cash Receipt Journal, then use the Refund function from the Customer Ledger Entries to process a refund via Payment Journal.

Apply to Next Invoice: Leave the overpayment unapplied in the customer ledger, and during the next invoicing cycle, manually apply the overpayment to the new invoice using Apply Entries.

https://learn.microsoft.com/en-us/dynamics365/business-central/payables-how-post-payments-refunds
https://learn.microsoft.com/en-us/dynamics365/business-central/walkthrough-setting-up-and-invoicing-sales-prepayments
https://learn.microsoft.com/en-us/dynamics365/business-central/payables-how-apply-purchase-transactions-manually

Hope this answer will help you!

Regards,
Mansi Soni

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RockwithNav 8,941 Super User 2026 Season 1 on at

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Technically you cannot translate a over payment as a prepayment but for sure you can achieve these -

1. Refund money

Payment Journal and use Doc type as Refund.

2. Apply it to (or offset it against) the next invoice.

Yes anyway your payment entry will remain open till then you go and apply them all.

Blog - rockwithnav.wordpress.com/
Twitter - https://twitter.com/RockwithNav
Facebook - https://facebook.com/rockwithnav/

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Jeffrey Bulanadi 9,112 Super User 2026 Season 1 on at

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Hi,

Handling overpayments as prepayments is a practical scenario in BC, and there are two clean ways to manage it depending on your intent.

Here’s what’s possible:

Refund the overpayment

Create a payment journal using the same customer and bank account. Post the refund and apply it to the original overpayment entry. This clears the balance and reflects the refund in the ledger.

Apply it to the next invoice

Leave the overpayment unapplied in the customer ledger. When posting the next invoice, use the Apply Entries action to offset the new invoice against the existing overpayment. BC will automatically reduce the open balance on the new invoice.

If you want to treat the overpayment as a formal prepayment, you can also post it as a prepayment invoice and apply it during the next sales order cycle. This requires setup of prepayment accounts and number series.

Helpful references:

Set up prepayments – Microsoft Learn
Sales prepayments walkthrough – Microsoft Learn
Setting up and invoicing sales prepayments – D365 Training
Manage prepayments in BC – LFSPL
Customer prepayment process – YouTube

If you find this helpful, feel free to mark this as the suggested or verified answer.

Cheers
Jeffrey

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YUN ZHU 99,049 Super User 2026 Season 1 on at

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Hi, Either approach is fine, depending on whether your client is willing to put the money with you.

Here is a similar discussion:

https://community.dynamics.com/forums/thread/details/?threadid=b7b0c741-a363-49cd-874f-c978e36af0c4

Hope this helps.

Thanks.

ZHU

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Andrés Arias 5,146 Super User 2026 Season 1 on at

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Hello Nobuhara,

Within business central, both options could be realized. Either generate a refund or apply to the next invoice. This will need to be defined with the customer, and involves more procedure than something within BC.

I hope the following link can also help you:

https://learn.microsoft.com/en-us/dynamics365/business-central/payables-how-apply-purchase-transactions-manually

I hope I can help.

Regards,

Andres

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Sohail Ahmed 11,169 Super User 2026 Season 1 on at

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You can handle overpayments in Business Central using payment journals and unapplied entries:

1. Refund money: Use the Refund action from the customer ledger entry or post a payment journal with a negative amount to refund the customer.

2. Apply to next invoice: Leave the overpayment unapplied and then manually apply it to the next invoice when it's posted, using the Apply Entries function.

✅ Mark this answer as verified if it helps you.

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