Table of contents
Overview
The happy path for the invoice to cash process is when a customer pays an invoice in full, promptly upon presentment.
So, what happens if you don't get paid in full? Or don't get paid at all?
Eventually, you find yourself deciding to write off some or all of a small subset of invoices. For each you need to adjust the remaining balance, and to do that you can create either an Invoice Adjustment or an Invoice Item Adjustment.
These adjustments can be used for several business processes, including writing off the invoice and issuing a credit. For a list of business processes supported by payment operations, see the article How do I understand the "Invoice to Cash" business processes that Payment Operations supports?
Solution
Both an Invoice Adjustment and an Invoice Item Adjustment fundamentally impact the invoice balance, and can bring the invoice balance to zero. The Invoice Adjustment adjusts the invoice total at the invoice header level. The Invoice Item Adjustment adjusts a specific invoice item, at the line level.
Using Invoice Item Adjustments
As a best practice, Zuora recommends that you use the Invoice Item Adjustment as your primary adjustment:
- The Invoice Item Adjustment is associated to the Invoice Item, so the service period of the Invoice Item Adjustment will match the service period of the Invoice Item. This is a mandatory requirement for revenue recognition.
- The Invoice Item Adjustment is created with the same Accounting Code as the Invoice Item. The financial impact of the Invoice Item Adjustment corresponds to the financial impact of the Invoice Item.
Using Invoice Adjustments
Invoice Adjustments have an advanced ability to make a positive invoice more positive and a negative invoice more negative. See the article How do I create an ad hoc charge or credit in Zuora? for more information.
Note: The ability to make a negative invoice more negative or a positive invoice more positive is an advanced Invoice Adjustment feature that is available via the Zuora API. This feature is not available for Z-Suite or QuickBooks integrations. Contact Zuora Global Support for more information about enabling this feature on your Zuora tenant.
Use Invoice Adjustments when you have the following requirements:
- You want to issue a late fee which is an additive charge to the Invoice.
- You want to enter a different accounting code for the invoice adjustment.
- You are not concerned with revenue recognition and you want a simple way to perform a credit against an invoice without worrying about any financial implications.
Related
- Adjusting Invoices
- Zuora provides two methods that you can use to adjust Invoices: Adjusting a line item (a charge or tax) on an invoice. Adjusting the total of an invoice. To adjust a single a line item, use an InvoiceItemAdjustment (available as of version 23.0 of the API). See Invoice Item Adjustment Use Cases for more information and examples. To adjust an invoice, use an InvoiceAdjustment (available as of version 24.0 of the API). See Invoice Adjustment Use Cases for more information and examples.
- Invoice Adjustment Use Cases (Intermediate)
- Invoice Item Adjustment Use Cases (Intermediate)
- How do I create an ad hoc charge or credit in Zuora?
- How do I handle a negative invoice?
- How do I handle write-offs?
- How do I use the Transaction Dates from Payment Operations?
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