Skip to main content
R
Rooks
February 8, 2020
Question

Process to handle deposits made from a customer

  • February 8, 2020
  • 1 reply
  • 0 views

I've got a seemingly straightforward question but for some reason, I'm finding the answer quite difficult to pin down...

 

I have a client that does catering and will receive deposits for jobs months in advance. These deposits should be held in a liability account (customer deposits) until the job is completed and finally invoiced.

 

My question is what is the best practice of handling deposits in QBO? I noticed that the deposit box on a sales invoice is linked to a bank account and can't be changed to a liability account. I've attempted having a product/service line item called "Discount @ 30%" and linking it to the "customer deposits" liability account and entering the deposit as a -$ amount which is fine if the client has finalized the invoice but if the invoice has NOT BEEN finalized - ex: customer pays $1,500.00 to hold the date but menu is undetermined at that time - I can't make an invoice for just the deposit amount.

 

What are my options when it comes to correctly handling and tracking deposits made by customers? My client is responsible for all A/R so I want to make this process as simple as possible for him.

 

Cheers!

1 reply

A
AndréB12
February 10, 2020

Hey Rooks,

 

It's awesome that you're looking to simplify how deposits are handled! QuickBooks is all about maximizing time savings, which includes offering quick and easy ways to record complex accounting transactions. Receiving deposits or retainers from customers is a regular practice for businesses of various sizes, and they can vary greatly based on your specific business.  The built-in deposit field on invoices is designed to track a deposit received on the invoice date, but there are several options available. You seem to have solid knowledge of how these deposits should be treated, so I'm confident we'll have no problem setting this up. I'll be happy to help you sort this out.

 

Your observation about the deposit field is correct. This field is to track deposits affecting Accounts Receivable and a selected Deposit Account on the invoice date. For more control over the affected accounts, it's best to use a combination of a Service item and a Sales Receipt. Setting this up makes it easy to record, and you're already done a portion of it. It's just a few simple steps to set up the service item:

  1. Select Settings ⚙, then select Products and Services.
  2. Select New.
  3. From the Product/Service information panel, select Service.
  4. Enter a name for the new product or service item (ex. Deposit).
  5. From the Income account ▼ drop-down menu, select your Customer Deposits liability account.
  6. Select Save and close.

To record a deposit before having a finalized invoice, you can easily create a Sales Receipt (these steps also work for an Invoice).

 

  1. Select the + New button.
  2. Select Sales Receipt.
  3. Select the Customer name from the drop-down.
  4. From the Deposit to ▼ drop-down menu, select the separate trust liability bank account you created, your main operating account, or the account this money will be kept in.
  5. In the Product/Service column, select the Retainer or Deposit item you set up.
  6. Enter the amount received for the retainer or deposit in the Rate or Amount column.
  7. Select Save and close.

Once this part is recorded, here's how to include it on any invoice:

  1. Create an invoice for your customer that lists the services or goods you provided.
  2. On the last line of the invoice, in the Product/Service field, select the Retainer or Deposit item.
  3. Enter the retainer Amount as a negative to subtract it from the invoice. You cannot enter a retainer amount greater than the invoice total. An invoice can have a zero total, but not a negative one.
  4. Select Save and close.

These steps should be enough to efficiently manage customer deposits. For additional options and tips to unlock powerful reporting, check out this handy article: Record a retainer or deposit 

 

Let me know if there's anything else I can help you with. I want to make sure this is easy and straightforward for your client.

C
Coffeeperk
January 30, 2021

We require a deposit to order and purchase material for the service for the customer. We need the $$ to pay for the material. We send an invoice to the customer for the deposit amount. It is paid. When we do the service and send the outstanding amount, we would like to show somewhere on the invoice the total cost of the service (including the deposit). When we put in the deposit already paid on that invoice in our reports, it shows up as negative in our cost of goods sold and reduces our Net Profit by the deposit amount. Essentially, the deposits and zeroed and not included in our numbers by the way we are doing it now. 

 

In hoping you understand the problem, how do we send two invoices to the same customer: one for the deposit and one for outstanding amount with the deposit somewhere on the invoice to show the total cost to the customer? Note the problem with the reports above. TIA

J
JamesM4
February 1, 2021

Hi Azwell99-nsa. Glad to hear from you again. I trust that all is well on your end and that business is going great. I'd be happy to answer your questions so you can record your transactions the right way. QuickBooks is the go to program for business owners looking to streamline their work. With our advanced features, you can easily create invoices and link deposits. Before linking deposits to an invoice, it's important to make sure:

  • There's an invoice for the customer.
  • Payment hasn't been entered and linked to the invoice.
  • The payment was entered through Bank Deposit instead of Receive Payment.

I encourage you to check out this helpful article with more information on: How to link a deposit to an invoice. The article goes in depth on how to accurately record your deposits on your invoices. If you find that you need to send more than one invoice for the same job, I recommend checking out our Progress Invoicing feature. This feature allows you to split an estimate into as many invoices as you need. I encourage you to learn more here. 

 

Feel free to ask other questions, I'm here to assist. :) 

 

Terms & ConditionsAccessibility statement