AP Adjustment

Or an AP Debit note, then apply them.

Just to confirm, we received the payment and applied to the AR invoice under the vendor's account. so now it shows an unapplied payment of $1.72 as they overpaid us. So are you saying I should go under the AP module now? 

Oh, you said vendor's Account, I read it backwards.  Do an A/R adjustment, or an A/R debit and apply it.

so I do an AR Debit entry under the GL account that I want this overpayment to get applied to?

Correct

So my last question would be, how do I apply that overpayment to that the debit entry once it has been created? Do I go under "Receipt Batch List" and choose apply payment?

Yes

amazing. thank you for your help!