At times, you may have vendors request a payment deposit on orders before they actually approve your purchase orders. The NetSuite Vendor Prepayments feature allows you to manage these kinds of payments. A prepayment is a real, General Ledger-posting kind of payment, but it’s just not connected to any POs yet. Let’s take a look at how this feature works and how you can get it set up in your NetSuite account.

Vendor Prepayments Overview

First, how exactly do vendor prepayments work? When you use the Vendor Prepayments feature, you can do things like—
  • Apply prepayments against existing open vendor bills
  • Use multiple prepayments for a single vendor
  • Apply prepayments either manually or automatically
  • Split a prepayment amount across multiple vendor bills
  • Set up a vendor prepayment approval process
And that’s not even all you can do with prepayments! This feature enhances your vendor payment process, giving you maximum control and flexibility over how you pay your vendors.

How to Set Up Vendor Prepayments

To set up the Vendor Prepayments feature, you’ll need to enable the feature, set up a vendor prepayment account, and set up the appropriate permissions.

Enable the Vendor Prepayments Feature

First, you can enable this feature on the Advanced Features section of the Accounting tab in Enable Features. If you ever need to disable this feature once you’ve used it, you can do that after deleting any vendor prepayment transactions.

Set Up a Default Vendor Prepayment Account

To use Vendor Prepayments, you’ll need to set up a Vendor Prepayment account. This account is used to track prepayment funds. You can either create an entirely new account or use an existing account, as long as the account is an Other Current Asset type account.
You can set the default Vendor Prepayment account at the company level or the subsidiary level, depending on whether or not your company has OneWorld. To set the default at the company level, choose the appropriate account in the Accounts Payable section of Accounting Preferences (Setup > Accounting > Preferences > Accounting Preferences). Or to set up the default account at the subsidiary level, choose the appropriate account under the Preferences subtab on each subsidiary record.

Set Up Vendor Prepayments Permissions

Who can work with vendor prepayments transactions? There are two permissions that affect vendor prepayments: Vendor Prepayment and Vendor Prepayment Application. Any roles that have the Vendor Prepayment permission can work with vendor prepayment transactions (depending on their permission level). And the Vendor Prepayment Application permission enables roles to work with applications for vendor prepayments.

How to Use a Vendor Prepayment

What does using vendor prepayments look like in practice? You’ll need to enter the prepayment and then apply it to purchase orders. Let’s see how you can do that.

Enter the Vendor Prepayment

To actually enter a vendor prepayment, navigate to Transactions > Payables > Enter Vendor Prepayment.
NetSuite Vendor Prepayment Record

On this record, you’ll select the vendor this prepayment will apply to in the Payee field. Some of the other required fields include the Prepayment account, the amount of the payment, posting period, and date. You can also select a purchase order for the prepayment to apply to, but it’s not necessary at this stage.

Alternatively, you could enter a prepayment directly from a purchase order. On a new purchase order, select the Enter Prepayment button at the top. This will take you directly to the vendor prepayment page, where the PO number is already linked to the prepayment.

NetSuite Enter Vendor Prepayment Button

Apply the Vendor Prepayment

When it comes to applying a prepayment to vendor bills, you have several options. By default, the Auto-Apply preference for vendor prepayments is turned on in Accounting Preferences. The Auto-Apply preference prompts NetSuite to check for prepayments that would be eligible to use on new vendor bills.
Your other option with applying vendor prepayments is to do so manually. One benefit of manually applying prepayments is that if a vendor has multiple bills in the system, you can allocate specific amounts of a single prepayment to each bill rather than the entirety of the prepayment going toward the oldest bill by default.
You can apply vendor prepayments manually from the Vendor Prepayment Application page. To get to this page, you’ll need to navigate to Transactions > Payables > Enter Vendor Prepayment > List, select View next to the prepayment you need, and then on the Vendor Prepayment record select the Apply button.


If you need to pay your vendor any amount up front prior to a purchase order, the NetSuite Vendor Prepayments feature has everything you need! To dive deeper into the weeds of how this feature works, check out the Vendor Prepayments page in the help docs.
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