Applied Balance

What is Applied Balance?

Applied Balance represents customer account credits being used to pay invoices during the reporting month. Instead of making a new payment, the customer uses existing credit on their account (from prepayments, overpayments, refunds, or other credits) to satisfy invoice amounts owed.

When balance is applied:

1. Customer Balance decreases - Credit is used up
2. Account Receivable decreases - Invoice is paid off (customer owes less)
3. No cash movement - No money changes hands (credit was already on account)

This row appears when customer balance is applied to invoices, not when the credit was originally issued.

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What Gets Applied?

Customer balance that can be applied comes from various sources:

• Prepayments made in advance
• Overpayments on previous invoices
• Refunds issued as store credit instead of cash
• Credits from billing adjustments
• Gift card balances
• Agency subscription credits

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Transactions Included

A balance application appears in "Applied Balance" when ALL of the following are true:

1. Created this month: Balance transaction created date is within the selected month
2. Applied to invoice: Transaction type is "applied to invoice" or "unapplied from invoice"
3. Has invoice: Transaction is linked to a specific invoice
4. Correct account and currency: Matches selected account and currency

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Real-World Examples

Example 1 - Using Prepayment Credit:

• Customer has $500 prepayment credit on account
• New $110 invoice is created
• Customer applies $110 credit to invoice
• Result in October's Report:
  • Customer Balance: -$110 (credit used)
  • Account Receivable: -$110 (invoice paid off)
  • Remaining credit: $390

Example 2 - Overpayment Applied:

• Customer accidentally paid $150 for $100 invoice last month
• Extra $50 stayed as credit on account
• New $75 invoice created this month
• Customer applies $50 credit + pays $25 new payment
• Result in October's Report:
  • Customer Balance: -$50 (credit applied)
  • Account Receivable: -$50 (portion paid via credit)
  • Customer also makes $25 actual payment (shows in Payments Received)

Example 3 - Gift Card Usage:

• Customer has $100 gift card balance
• Places order for $60
• Gift card balance applied to order invoice
• Result in October's Report:
  • Customer Balance: -$60 (gift card used)
  • Account Receivable: -$60 (order invoice paid)
  • Remaining gift card: $40

Example 4 - Refund Credit Applied:

• Customer received $200 refund as store credit last month
• New subscription invoice for $120 created
• Credit applied to subscription invoice
• Result in October's Report:
  • Customer Balance: -$120 (credit used)
  • Account Receivable: -$120 (subscription paid via credit)
  • Remaining credit: $80

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Columns Affected

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Customer Balance

What Does This Number Mean?

Customer Balance shows how much credit was used from customer accounts to pay invoices.

Think of it as: "Store credit being spent"

The Exact Calculation

For each balance application this month:
  Add: -1 × Balance transaction amount

Result is shown as a NEGATIVE number (credit decreasing)

Why Is This Number Negative?

Customer Balance is an asset from the customer's perspective (credit they can use). When they use it, the asset decreases, shown as negative.

Example:

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Account Receivable

What Does This Number Mean?

Account Receivable shows how much less customers owe you because they used credits instead of making new payments.

Think of it as: "IOUs paid with credits"

The Exact Calculation

For each balance application this month:
  Add: -1 × Balance transaction amount

Result is shown as a NEGATIVE number (receivable decreasing)

Why Is This Number Negative?

Account Receivable is an asset (money owed to you). When it's paid off with credits, the asset decreases, shown as negative.

Note: The amount is always equal and opposite to Customer Balance - when $100 credit is applied, Customer Balance goes down $100 and Account Receivable goes down $100.

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Applied Balance vs. Payments Received

Key Differences

Example Timeline:

Month 1 (September):

• Customer makes $500 prepayment
• Payments Received: Cash +$500, Customer Balance +$500

Month 2 (October):

• Invoice created: $110
• Customer applies credit to invoice
• Applied Balance: Customer Balance -$110, Account Receivable -$110
• NO entry in Payments Received (no new cash)

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Unapplied Balance

Sometimes credits that were applied get "unapplied" (reversed):

• Invoice gets voided after credit was applied
• Customer changes payment method
• Billing adjustment corrections

When this happens, the amounts reverse:

• Customer Balance: Increases (credit returned to account)
• Account Receivable: Increases (invoice debt restored)

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Common Questions

Why is this different from "Payments Received"?

• Payments Received: New money coming in from customers
• Applied Balance: Existing credits being used to pay invoices

No new cash is involved in Applied Balance - the credit was already on the customer's account.

When was the credit originally created?

A: The credit could have been created in any previous month through:

• Prepayments
• Overpayments
• Refunds issued as credit
• Billing adjustments
• Gift cards purchased

This row only shows when credits are used, not when they're created.

Can customers apply credits to any invoice?

A: This depends on your system configuration. Typically, customers can apply their account balance to pay for any outstanding invoice or new purchase.

What if a customer applies more credit than the invoice amount?

A: Credits can only be applied up to the invoice amount. If a customer has $500 credit but an invoice is only $110, only $110 is applied. The remaining $390 credit stays on their account.

Do taxes get paid with applied balance?

A: Yes. When an invoice is $110 (including $10 tax) and a customer applies credit, the full $110 including tax is paid via the credit application.

Can I see which invoices had credits applied?

A: Yes! If you have the appropriate permissions, there's a download icon next to this row that lets you export detailed transaction data showing which customers applied credits to which invoices.

What's the difference between applied and unapplied balance?

• Applied: Credit used to pay an invoice (Customer Balance and AR both decrease)
• Unapplied: Previously applied credit reversed (Customer Balance and AR both increase back)

Unapplied happens when an invoice is canceled or voided after credits were already applied to it.

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Summary

Quick Reference:

What appears here: Customer account credits applied to pay invoices

Inclusion criteria:

• Balance transaction created this month
• Type: Applied to invoice or Unapplied from invoice
• Linked to a specific invoice
• Correct account and currency

Columns:

• Customer Balance: Negative (credits used)
• Account Receivable: Negative (invoices paid with credits)

Key Point: No cash movement - using existing credits, not making new payments