How payment application works: clearing open invoices without guesswork.

Apply cash to an invoice ID. Not to a vendor name. Not to the oldest open bill. A $12,400 ACH that equals two different invoices is not a match. It is a guess until the remittance names the IDs.

Remittance names the invoice IDs

The bank feed tells you money left. The remittance, check number, or ACH memo tells you which bills it covered. Those are different files. If the remittance is missing, the cash sits unapplied. Unapplied cash is a recon item. It is not "we paid them." The vendor still shows those invoices open, and so should you, until you can point at IDs. A vendor statement is the check after you apply, not the method you use to apply. If the statement says paid and you cannot name the IDs, you have a conversation, not a close.

Proforma and deposit documents

Proforma and deposit documents are their own IDs. Applying a factory deposit to a commercial invoice that does not exist yet will fake-close goods you have not been billed for. The deposit payment closes the deposit. When the commercial invoice arrives, often weeks later after the container leaves China, apply remaining cash and any residual to that invoice. Do not reuse the deposit payment as if it were the goods payment. How the deposit sits on the PO, and when WAC moves, is a different question. Here the only question is which document ID the cash closed.

Partials, credits, and chargebacks

Partials, credits, and chargebacks leave a residual. You paid $8,000 on a $10,000 bill: $8,000 applied, $2,000 still open. A vendor credit for a short, or a chargeback they took, applies to the invoice it belongs to. Not as a floating vendor balance you hope nets out at quarter end. Overpayments stay as a credit on that vendor, tagged to the invoice if you can. Do not dump them into miscellaneous AP.

Splitting one payment across invoices

If one wire covers three invoices, split the application across those three IDs. A single click on the largest bill leaves two open and a residual that will fail the next vendor statement. Do not auto-apply by vendor plus amount. Two invoices for the same total, a deposit and a balance payment, or a credit that equals a new bill, will clear the wrong one. Multi-currency is the same rule: apply the payment to the invoice ID in the invoice currency. A USD residual on a CNY bill is not a match because the dollars look close.

A human reads the remittance. The system stores which IDs closed. That is the control. This is not three-way matching and not the deposit prepaid. It is the bank-to-invoice click after those things already exist.