Advance Payment Before an Invoice Exists: How to Track It Correctly

Advances are common — a deposit before starting a project, a retainer paid up front, a booking confirmation. The invoice for that work might not exist yet, but the payment is real, received, and needs a record the moment it arrives, not weeks later when someone finally gets around to invoicing.

Why "I'll record it when I invoice" doesn't work

Between receiving the advance and issuing the eventual invoice, that money is genuinely part of your finances — it affects your actual cash position, and under GST, an advance received can itself have tax timing implications (see time of supply and advance payments). Waiting to record it until the invoice exists means your books understate reality for however long that gap lasts.

What correct tracking looks like

• Record the payment against the party the moment it's received, even with no invoice to attach it to yet — this is exactly what unallocated credit is for.
• Issue a receipt voucher if GST applies to the advance — see invoice vs bill vs receipt vs voucher for why this is a distinct document type, not informal paperwork.
• Apply it to the invoice once issued — the advance becomes part of that invoice's payment, drawn from the credit already on record rather than treated as a brand-new payment.

What if the work never happens?

If the advance needs to be returned — the project falls through, the booking is cancelled — a refund voucher closes it out formally, the same way a credit note closes out an issued invoice. The advance was real money on record; reversing it needs an equally real record, not a quiet deletion.

Treating an advance as instantly-recorded credit rather than a mental note is the same discipline behind recording a part-payment correctly — money that's actually moved should be reflected the moment it moves.