Xero has a “secret” transaction type (two – in fact) that many users aren’t aware of, and those that do often mis-use. It’s called “Prepayment” and “Overpayment”. These transaction types are actually variations of the standard Spend/Receive Money bank transaction but they have very unique treatments. These transaction types allow you to record money received from a customer (or paid to a supplier) BEFORE the proper invoice has been received.
PPOP1You access them from the Spend/Receive Money entry screens from the Manage Account menu (but, for some reason, not from the New Transaction widget on the Account Transactions screen).
From the Reconcile screen you need to be on the Create tab, then click “Add details.” The Prepayment/Overpayment options are in the drop-down menu beside the “Spend As” or “Receive As” menu. The default option is “Direct Payment.”