Using Overpayment account to "pay" bills

Due to credit limits, we paid a supplier a £24K deposit last year. We posted this to Overpayments account on the balance sheet. That was in a now finalised accounting year.

Now we are winding down our business with the supplier so we have asked for the deposit back.

Supplier has said we should just use up the deposit gradually to "pay off" unpaid bills from them.

What is the best way to move the balance out of the balance sheet and into something that allows it to "pay" bills? Would be great if I could get it into unallocated payments and then use it to allocate - but not sure how.