The Invoice Settlement feature is generally available as of Zuora Billing Release 296 (March 2021). This feature includes Unapplied Payments, Credit and Debit Memos, and Invoice Item Settlement. If you want to have access to the feature, see Invoice Settlement Enablement and Checklist Guide for more information.
Unapplied payments are money received from customer accounts that has not been applied to invoices and debit memos. You might need to create unapplied payments under any of the following situations:
- You do not know what customer account the payment belongs to.
- You know what customer account the payment belongs to, but you do not know which invoice the payment is applied to.
- You receive a payment from your customer that exceeds the balance on their invoice.
- You receive a payment from your customer before the invoice has been created.
Unapplied payment amount is shown as Unapplied Amount on each payment. Zuora does not use Credit Balance to record the unapplied payment amount. The unapplied amount cannot be negative. When the unapplied payment is applied to an invoice or debit memo, the unapplied amount is decreased. The applied amount is increased. The sum of applied amount and unapplied amount equals the payment amount of the payment.
Zuora uses the same payment elements to track all the operations on a payment. The following payment elements stay the same when you perform operations on a payment:
- Payment number
- Payment date
- Payment amount, and related information, including payment method and so on
This avoids generating a new payment for each payment operation. For example, an unapplied payment is created with the payment number P-00000020. All the operations on this payment, such as applying a payment and transferring a payment are all on the same payment with the payment number P-00000020.
The Unapplied Payment feature records all the payments in Zuora even if the information about customers or invoices is missing. The payments are listed in the payment list. You can find the payment list by navigating to Payments > Payments in the left-hand navigation section from the Zuora UI.
When recording payments in Zuora, you can only apply payments to one or more invoices. And once the payments are applied, how payments are applied cannot be changed. But if you have the Unapplied Payment feature enabled, you can do the following operations from the Zuora UI and REST API:
- Create a full or partial unapplied payment for a customer account
- Record payments without specifying customer accounts
- Apply full or partial unapplied payments to invoices and debit memos
- Unapply the applied payments from invoices and debit memos; then reapply the unapplied payments to other invoices and debit memos
- Transfer unapplied payments between customer accounts
- Refund unapplied payments to customers
- Unapply the applied payments that are in closed accounting periods
- Apply or transfer the unapplied payments that are in closed accounting periods
- Finance integration with Invoice Settlement
Note that you can apply payments and refunds to invoice items and debit memo items. But you cannot apply payment items and refund items to invoices and debit memos. Zuora does not support item-level payment and refund functions.
The common use cases for the Unapplied Payment feature are as follows:
You receive a customer payment but you do not know to which invoice the payment should be applied.
For example, a customer sends a check to you without an invoice number. You know what account the check belongs to, but you do not know to which invoice to apply the payment. You can record the payment as "unapplied". After verifying with the customer which invoice they want to pay, you can then apply the unapplied payment to the correct invoice.
When you receive a payment and you do not know to which customer account the payment belongs. You can record the payment as "unassigned" without specifying the customer account.
For example, a customer sends a check to you with no obvious account or invoice information. You can record the unapplied payment without specifying the customer account. Later, you can assign the unapplied payment to the correct account, and apply it to invoices.
A customer sends a payment that exceeds the invoice amount.
For example, a customer remits an overpayment. With the Unapplied Payment feature, each payment can track their applied and unapplied amounts. In the case of an overpayment, a part of the payment would be applied to one or more invoices, reducing their balances to zero. The remainder of the payment would be held as unapplied and available for future use to settle open balances. This feature makes it much easier to tell how invoices are being settled and by which payments.
A customer sends a payment before an invoice has been generated.
With the Unapplied Payment feature, each payment can track their applied and unapplied amounts. In the prepayment scenario, the payment can be recorded as fully unapplied. Once Zuora generates invoices for the customer, the payment can be applied to one or more of those invoices, as needed.
Unapply and Reapply Payments
The payment is applied to a wrong invoice.
For example, your customer pays an invoice. Later, you find a mistake on the invoice. You can unapply the payment from the invoice and then refund or apply the unapplied payment to a different invoice later.