Sometimes, a contact acts as both a customer and a supplier. If you have outstanding sales and purchase invoices for the same vendor, you can "net off" the accounts so that only the final difference (the net amount) is paid or received.
Follow this step-by-step guide to correctly offset these balances in the system.
Step 1: Ensure All Invoices are Entered
Before processing the adjustment, ensure that all relevant customer invoices and supplier invoices have been fully entered into the system.
Step 2: Post the Contra Adjustment
You will need to enter a two-line adjustment to transfer the balances.
Date & Description: Date the adjustment the same date as the actual net payment. Add a clear description (e.g., "Two way trader for [contact name]").
Line 1 (Customer Side): Allocate this line to Category 7600 - Amount owed from Customers. Once selected, a new column will appear—use it to select the specific customer.
Line 2 (Supplier Side): Allocate this line to Category 8000 - Amount owed to Suppliers. In the next column, select the corresponding supplier.
Enter the Debit & Credit Amounts: Find the total outstanding balance for both the customer and supplier ledgers for this vendor. Take the lower balance of the two, and enter it as follows:
Enter the lower balance amount as a Credit on the customer line.
Enter that same amount as a Debit on the supplier line.
Click Save to post the adjustment.
This leaves the net difference outstanding on the ledger that had the higher initial balance.
Step 3: Allocate the Adjustment to Outstanding Invoices
Now, you need to match the adjustment to your open invoices to clear them down.
Navigate to the outstanding invoices on both the customer and supplier sides.
Click Edit on an outstanding invoice, and then immediately click Save. This action forces the system to pull the "on-account" amount created by your adjustment and apply it to the invoice.
Note: If there are multiple outstanding invoices on either ledger, you must repeat this Edit > Save process for each invoice until the entire adjustment amount has been fully allocated.
Once finished, the ledger with the lower balance will be completely marked as paid, and the other ledger will display only the remaining net amount.
Step 4: Allocate the Final Net Payment
When the actual bank transaction for the net amount occurs, you can easily clean up the remaining balance:
Match the bank transaction directly to the remaining outstanding balance.
This will be on either the supplier or customer ledger, depending on which side originally held the larger balance.
Ensure all relevant supplier and customer balances are entered.
Enter an Adjustment
See a working example below
Supplier Balance:
Customer Balance:
Adjustment:
Updated Balances:
Allocate the on-account:
Enter the net payment:
