Account for costs that are paid upfront but relate to a future period with prepayments. These expenses could include annual insurance, software licenses, or subscriptions that are invoiced and paid in advance.
Important: This feature is currently only available for accounts connected with Xero.
Without proper treatment, these expenses distort monthly reporting, concentrating the full cost in one period instead of spreading it over the duration of the service. The prepayments feature provides a way to reallocate and then unwind these expenses over time through journal automation.
How to use Prepayments
- In the Costs Inbox, open the relevant item.
- On the Item details page, scroll down to the ‘PAYMENT’ section and set ‘Prepaid Expense’to Yes.
- Select a Payment start and end date for the prepaid expense. This is mandatory.
When all other item details are complete, the item can then be published to Xero.
What happens when the item is published to Dext?
The flow remains consistent with the usual publishing to Xero process, but with extra logic layered on top:
1. Initial Reallocation on Invoice Date
When the prepayment is published to Xero, Dext creates a manual journal that:
- Debits the “Prepayments” account
- Credits the expense category originally assigned (e.g. “Insurance”)
This removes the full amount from the expense account and shifts it to a balance sheet prepayment account.
2. Monthly Recognition Journals
Dext then generates a series of manual journals, one for each month of the coverage period:
- Credits the Prepayments account
- Debits the original expense category
- Each journal amount corresponds to a straight-line allocation (e.g. £100/month for 12 months)
Because Xero doesn’t provide an API for creating repeating journals, these entries are all posted individually at once. This means the full journal schedule is created upfront based on the document’s date range.