Your regular factory proposes one advance to be used against future releases. There is no accepted order for all the money yet. Before paying, define what the supplier receives, what it may apply to each later order and how an unused balance will be resolved. A convenient payment rhythm can create a new seller-held exposure.
The arrangement and ledger below are fictional editorial illustrations, not an A2vanta account, escrow service or standard supplier offer. This is general information, not legal, accounting or tax advice. Counsel and your accountant must assess the actual agreement.
Classify the commitment before funding it
Is the money a goods advance, a refundable deposit, security for a commitment or something else? Record the purpose, parties, currency and obligations created at funding. The name used in an email does not determine the classification or make money refundable.
Ask what happens if you place no orders, the relationship ends or the seller cannot supply. Negotiate expiry, unused-balance treatment, refund conditions and timing where relevant. Have counsel review remedies and insolvency exposure. This article does not promise that the advance is protected or that paying gives you title to unidentified goods.
Require authority for each drawdown
For each accepted call-off, agree the amount applied and the invoice or milestone it reduces. Identify who can authorise application, how the supplier acknowledges it and whether any fresh payment remains due. Do not let a factory allocate funds to an unapproved order merely because it holds the advance.
Articles 6.1.12-6.1.13 of the UNIDROIT Principles 2016 address allocation of payments in general. They are not automatically applicable law and do not supply all the terms of a standing advance arrangement. Counsel should review the agreed mechanism and mandatory rules. Do not assume you can unilaterally net unrelated balances.
Preserve an opening-to-closing reconciliation
| Movement | Supporting record |
|---|---|
| Opening advance | Previously agreed balance and currency |
| New funding | Authorised top-up and supplier receipt |
| Application | Accepted order, agreed amount and acknowledgement |
| Reversal | Agreed correction with the original application reference |
| Refund | Contractual basis, amount and verified receipt |
| Closing advance | Reconciled unused balance and open exceptions |
A fictional single-currency balance might open at 10,000, receive a top-up of 2,000 and apply 3,000 to one accepted release and 4,000 to another. The resulting unused advance is 5,000, before any other agreed movements. These are arbitrary arithmetic inputs, not recommended funding amounts. A proposed drawdown is not a completed application until the required agreement and evidence exist.
Keep currencies separate. Distinguish an instruction sent, a payment received and an advance actually applied. Avoid counting the same drawdown again when finance records the reduced invoice balance. This record is an editorial commercial reconciliation, not a prescribed accounting ledger.
Top up against a defined need
Before replenishing the advance, compare the confirmed unused balance with accepted and proposed releases. Agree a limit to seller-held exposure and who can approve exceeding it. A forecast of purchases is not automatically an obligation to maintain a particular balance.
If the supplier requests another top-up while an application is disputed, identify the difference and resolve it through the agreement. Do not erase the disputed line or pay solely to make the spreadsheet balance. Conversely, this reconciliation does not establish a general right to withhold an unrelated due payment.
Keep it distinct from payment-service funding
The instalment guide concerns partial payments against an identified invoice. This advance instead exists before some future orders have been accepted.
The combined-funding guide concerns funding a payment batch with separate supplier payouts. A seller-held commercial advance is not a pooled provider wallet, trust arrangement or escrow. Record who actually holds the money and who owes the unused balance.
Hand over classification and unused-balance terms
The IFRIC 22 overview concerns foreign-currency transactions and advance consideration. Whether this arrangement falls within its scope depends on the facts and applicable reporting framework. Give the accountant the agreement, funding dates, applications and refund rights; do not assume every advance receives identical measurement.
Use the advance and FX records guide for the separate accountant handover. Do not merge the commercial unused balance with the accountant's reporting-currency valuation.
At expiry or exit, obtain a supplier-confirmed closing statement, settle authorised applications and track any agreed refund to receipt. If terms are unacceptable, discuss paying identified orders separately instead of introducing a standing advance.
Use pay an invoice to ask A2vanta about an approved payment before funding. Buyer and supplier must agree the commercial drawdown arrangement; payment handling does not protect the advance or guarantee a refund.