Deal with small underpayments

This article explains how to deal with receiving a small underpayment on an invoice from a customer in FreeAgent.

The example below is of a scenario where you invoiced a customer for $50 and they paid you $49.99, underpaying you $0.01.

1. Create a new spending category

Navigate to the Settings page and select ‘Accounting Categories’.

Navigate to the ‘Add New’ drop-down menu and select ‘Admin Expenses category’.

Select the relevant Reporting Name and call the new category something similar to 'Penny roundings' in the ‘Description’ field. 

2. Explain the invoice payment

Each time you receive a payment from a customer that falls a penny or two short of the amount you've invoiced, you’ll need to split the bank transaction and explain it as follows.

Navigate to the relevant bank transaction and select ‘More options’.

First, select 'Invoice Receipt' for the transaction 'Type' and select the relevant invoice from the drop-down menu.

Change the amount in the 'Value' box to match the amount of the invoice. Using the example above, you'd change the amount of the transaction from $49.99 to $50.

Select ‘Create New Explanation'. This will ensure the invoice shows as fully paid.

3. Explain the unpaid amount

After increasing the value of the transaction, FreeAgent will have created a new transaction for the amount of the underpayment, $0.01 in the example above.

Select 'Payment' as the transaction 'Type' and select the Penny roundings category you created.

Select ‘Explain transaction’ to complete the process.