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Brittanyxo1
March 1, 2023
Question

Vendor prepaying for work

  • March 1, 2023
  • 1 reply
  • 0 views

Hello Community! 

I have a vendor that is prepaying for work upfront. As we complete the work, I would like to reflect the work on their invoice and show the amount being credited to their account. How do I handle this properly?  

Thank you in advanced! 

 

1 reply

Adrian_A
Adrian_A
March 1, 2023

Hi there, Brittanyxo1.

 

You can set up a retainer to record the advance payment. I'm here to guide you through the steps.

 

First, create a liability account to track the amount of the retainer:

 

  1. From the Accounting tab, select Chart of accounts.
  2. Click New.
  3. Under Account Type, select Other Current Liabilities.
  4. On the Detail Type, choose Trust Accounts - Liabilities.
  5. Give it a Name.
  6. Select when you want to start tracking your finances on the selected account.
  7. Click Save and Close.

 

Second, add a retainer item. Here's how:

 

  1. Select Products and services from the Sales tab.
  2. Click New.
  3. Choose Service.
  4. Enter a Name.
  5. From the Income account, select the liability account you created earlier.
  6. Hit Save and close.

 

Then, you can either create a liability bank account if you want to keep the money in a separate trust account. If you don't want to, you can directly add an invoice for the deposit. Once the work is complete, you can turn the retainers into credits on the invoice. You can check this reference for detailed steps of the process: Create sales receipts or invoices for deposits or retainers.

 

If you have other concerns about managing your customer transactions, you can check our Help Articles page.

 

I'll be around whenever you have concerns about QuickBooks. I've got your back!

    B
    Brittanyxo1Author
    March 1, 2023

    Hi Adrian_A,

    Thank you for the info! if I create a liability account, will I be able to use the money right away for expenses? I am not sure if a retainer is the way to go because the vendor is doing us a favor paying in advanced so we can use the money now. 

    M
    MirriamM
    March 1, 2023

    Good to see you back, @Brittanyxo1.

     

    Yes, you can use the money for expenses since it's recorded in your bank, even though it's accounted for in the liability account. That said, it will use the money in the bank and won't affect the liability account.

     

    For future reference, you may want to check out these articles to guide you in case you need to personalize your invoices and other sales forms and receive invoice payments in QuickBooks Online:

     

     

    Keep me posted on how it goes in the comments below. If you have other concerns about customer deposits or questions about managing sales and income transactions in QBO, I'm always ready to help. Take care, and have a great day, @Brittanyxo1.

     

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