Question

Customer Deposits

Forum|Forum|4 years ago
September 20, 2021
2 replies
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I guess this is a bit of a 2 parter question.

I am a new business owner (sole proprietor) and new to bookkeeping/QBO.

I take a 50% deposit from customers which goes towards the purchase of supplies for their project.

When I do this, I create an invoice and enter the amount received in the deposit box on the invoice. I then send the customer this invoice with a note saying to disregard the review and pay option and I will resend the invoice upon completion of their job. I will set the invoice due date to the expected date of project completion so it does not show as overdue.

QBO does not have a great system for deposits and I wish this was different - but I am open to alternative options/suggestions!

I have just recently started doing it this way and as I am coming up to the end of this quarter - I realized that it is recording my taxes owning to include all those I have taken deposits on since I have them as open invoices (taxes owing are based on the full amount of the invoice). Some of these projects are not starting until October/November so technically I wouldn't be paying the taxes on the amount collected until next quarter.

My questions:

1) Is there a better way to record customer deposits?

2) How do I record a deposit without affecting the taxes I owe?

I hope that all makes sense! Like I said I'm new to all this and learning as I go!

QuickBooks Online

J

JamesM4

Hello Cheryl,

QuickBooks makes it simple to keep track of your transactions. With the amazing tools and features offered by the program, you can easily simplify the way you handle your accounting. I'd be glad to steer you in the right direction so you can focus on the things you enjoy doing.

Making sure you're recording your transactions properly is an essential step for maintaining clean books. Based on what you've described, I encourage you to check out this helpful article which shows you how to properly:

Manage upfront deposits or retainers in QuickBooks. I'd also suggest reaching out to an accounting professional for expert advice on how to categorize the transactions. If you're not in contact with a professional, don't worry, you can search for one using this link here.

If you still have questions after checking out the article above, feel free to leave a comment below. I'll be here to assist.

C

Cheryl_EAuthor

So if I am understanding correctly, this is holding the deposit as a liability until applied to the final invoice upon completion of the project.

Would this still be applicable if I was using the funds received as a deposit to purchase the custom products and not being held as a liability?

What is the purpose of the deposit field on the invoice if that is not the correct way to record a deposit?!

J

JamesM4

Hello Cheryl_E. Glad to hear back from you again. You can search for third-party apps on our website using this link here. I recommend going with an app that suits your business needs based on the app description and reviews. The deposit is handled as a liability to show that, although your business is holding the money from a deposit or retainer, it doesn't belong to you until it's used to pay for services. This article here has more info on how to create a liability account if you need to and it also goes over how to best use the deposit feature in QuickBooks. Let me know if this info helps, I'll be one message away in case you need anything.