[Full] How to create a contra payment

Welcome to the help guide series for our Full Accounting product

If you have an outstanding invoice for a customer and a bill from that same contact, you can use a "contra payment" to offset the amounts against each other.

To do this, you will need to create a temporary "Contra" bank account, pay off both the bill and the invoice using this account, and finally transfer any remaining difference to or from your actual business bank account.

Example Scenario (Different Amounts):

• You are owed (Invoice): £500
• You owe them (Bill): £250
• Net Result: The contact only needs to pay you £250.

How it works: You will record £500 and £250 payments against the Contra account. The resulting balance (£250) is then transferred from the Contra account to your main business account.

Example Scenario (Matching Amounts): If both the invoice and the bill are for £250, they cancel each other out completely. The Contra account balance will sit at £0, and you will not need to make any final transfers.

Phase 1: Set Up the Contra Account

Before you can offset the payments, you need a dedicated space in the system to hold the funds temporarily.

• Step 1: Add a New Bank Account: Navigate to Money > Bank Accounts and click on the Add account button.

• Step 2: Name and Save the Account: Enter "Contra" in the Bank Name field and hit the Save button to proceed.

Phase 2: Pay the Invoice Using the Contra Account

Next, record the customer's invoice as paid using your newly created Contra account.

• Step 3: Locate Unpaid Invoices: Navigate to Sales > Invoices and click on the Unpaid tab.

• Step 4: Select the Specific Invoice: Click on the appropriate invoice number under the Invoice # column.

• Step 5: Record the Invoice Payment: Fill in the required details on the 'Record payment' form (located towards the bottom right). Crucially, ensure you select the Contra account from the Bank Account drop-down box, then hit the Pay button.

Phase 3: Pay the Bill Using the Contra Account

Now, offset the amount you owe the contact by recording their bill as paid through the same Contra account.

• Step 6: Locate Unpaid Bills: Navigate to Purchases > Bills and click on the Unpaid tab.

• Step 7: Select the Specific Bill: On the unpaid bills menu, click on the appropriate Bill ID under the ID column.

• Step 8: Record the Bill Payment: Fill in the required details on the 'Record payment' form. Again, make sure to select the Contra account in the Bank Account drop-down box, then hit the Pay button.

Phase 4: Transfer the Final Difference (If Applicable)

Finally, move the net difference out of the temporary Contra account and into your actual business bank account. Note: If your invoice and bill were for the exact same amount, your Contra account balance will now be zero. You do not need to complete this phase.

• Step 9: Navigate to Bank Accounts: Go to Money > Bank Accounts.

• Step 10: Access Imported Statements: Click on the link beside your main business bank account (or whichever account the payment was made to/from) to explain your imported statements.

• Step 11: Locate the Transaction: Find the imported transaction that represents the net difference paid or received (e.g., the £250 payment from the contact).

• Step 12: Explain as a Transfer: Use the Transfer tab to explain this transaction. Select your Contra account as the transfer destination/source and confirm the details to complete the process.