Advance payment
An advance payment is a payment before the service is delivered; at the moment it arrives it is not income but a liability towards the customer, because the counter-performance is still owed.
Definition
For businesses with long contracts — construction, plant engineering, events — the advance is a liquidity instrument and at the same time a source of error at year end: booked as turnover, it shows the profit too early. The correct treatment is release with the final invoice.
For VAT the tax claim arises, under accounting by agreed consideration, already with the invoice; under accounting by payments received, with receipt of the money. The advance payment is therefore also where the chosen accounting method becomes tangible.
Where to read it
What the software must be able to do
Check whether the software knows advance invoices, reduces the later final invoice by the advance, and links both to the same project. Workarounds with two unlinked invoices regularly lead to VAT being shown twice.
Checked Aug 2026
More terms under Invoicing, payment and banking: Allowance for doubtful debts Bad debt camt.053 Cancellation invoice Cash discount Certificate of shortfall Credit note Creditor Current account Debt enforcement Debtor Default interest Delivery note Dunning eBill Final invoice IBAN Invoice number ISO 20022 / camt Open items pain.001 Part payment Payment term Pro forma invoice QR reference QR-bill QR-IBAN Quotation Receipt Tips TWINT as a payment method Visitor taxes