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Apples521
April 16, 2025
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Can I send an invoice with a due date 3 months later?

  • April 16, 2025
  • 1 reply
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I have a $1,000 project where I require 50% up front and the remaining 50% at completion 3 months from now.  I am on accrual accounting.  What's the best way to do this?  I see two options

1.  I send two invoices now.  One on 4/15 for 50% deposit of $500 due upon receipt and another invoice 4/15 with a due date of 7/15 for the remaining $500 balance.  This will show the total $1000 in my A/R as of today, but I don't really want to send a second invoice this early with a due date for 3 months later.

 

2.  Send one invoice now, 4/15 for the 50% deposit and a second invoice in July for the remaining 50%.  This won't show my outstanding 2nd half until I invoice for it though.

 

What's the most proper way to bill this $1000 project with 50% down under accrual accounting?

Best answer by Rainflurry

@Apples521 

 

No. 2 is correct.  You don't want to show income until you have provided the service under accrual accounting.  The $500 deposit is considered deferred revenue until you bill for the completion of the work in July.

 

To do that, set up a service product called 'Customer Deposit' or something similar and map it to an other current liability account called 'Deferred Revenue' (set one up if you don't have one).  Then, create the 4-15 invoice and use the 'Customer Deposit' service product.  That increases both A/R and Deferred Revenue by $500 as of 4/15.  

 

When you bill for the completion of the work in July, create an invoice for $1,000 and add a line item for the "Customer Deposit" entered as -$500.  That books $1,000 as income (assuming your products on the invoice are mapped to income), reduces Deferred Revenue by $500, and books $500 to A/R.     

1 reply

Rainflurry
RainflurryAnswer
April 17, 2025

@Apples521 

 

No. 2 is correct.  You don't want to show income until you have provided the service under accrual accounting.  The $500 deposit is considered deferred revenue until you bill for the completion of the work in July.

 

To do that, set up a service product called 'Customer Deposit' or something similar and map it to an other current liability account called 'Deferred Revenue' (set one up if you don't have one).  Then, create the 4-15 invoice and use the 'Customer Deposit' service product.  That increases both A/R and Deferred Revenue by $500 as of 4/15.  

 

When you bill for the completion of the work in July, create an invoice for $1,000 and add a line item for the "Customer Deposit" entered as -$500.  That books $1,000 as income (assuming your products on the invoice are mapped to income), reduces Deferred Revenue by $500, and books $500 to A/R.     

A
AdonL
April 17, 2025

Thank you for providing more details about your situation, @Apples521. I'm glad to step in and help you with your inquiry about sending invoices when managing projects in QuickBooks Online (QBO).

 

Under accrual accounting, you record income and expenses when you send the invoice or receive the bill. I agree with @Rainflurry's suggestion to create a service item and a liability account (if you haven't done so yet) before sending your invoices. For your convenience, I'll outline the steps below.

 

To create a liability account:

 

  1. Go to Settings, then select Chart of Accounts.
  2. Select Other Current Liabilities from the Account Type dropdown.
  3. Pick Trust Accounts - Liabilities as a Detail Type.
  4. Enter the account name (for example: Trust Liabilities) or accept the suggested name.
  5. Choose an option from the When do you want to start tracking your finances from this account in QuickBooks? list.
  6. Click Save and Close.

 

To create a service item:

 

  1. Go to Settings.
  2. Select Products and Services and click New.
  3. Choose Service from the Product/Service information panel.
  4. Name the service item (for example: Retainer).
  5. Pick the liability account you have created from the Income account dropdown menu.
  6. Click Save and Close.

 

For more details about this process, reference this article: Record a retainer or deposit in QBO.

 

We also suggest consulting with your accountant to ensure everything aligns with your business needs and accounting practices. If you don't have an accountant, please refer to this article: Find an Accountant near your area.

 

Furthermore, you can check out this article to learn about reports that can help you track your projects and maximize their earnings: Project profitability and progress in QBO.

 

Proper billing ensures your financial statements accurately reflect your business's financial position. Please post here again whenever you need help managing invoices, projects, or anything else in QBO. The Community space is always here to assist with your queries!

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