QuickBooks Online: Customer Deposits, Pre-payments, Retainers, and Progress Invoicing

[@HectorGarciaCPA]

QuickBooks Online 30-day free trial + 30% off link: quickbooks.intuit.com/partners/irp/?cid=irp-4337#pricing

[@babsoneverything3060]

Hector, I just want to say that I've referred to many of your videos and you have helped me so much!!! Thank you for so generously sharing your knowledge!! You are so appreciated!!!

[@HectorGarciaCPA]

:)

[@Muttirehman]

Thanks for making life easy for people by giving your precious time while the in-depth explanation of the issues.

[@HectorGarciaCPA]

You are welcome

[@patriciazamarripa8320]

If I only have 2 payments due (deposit and balance upon delivery) could I just use the deposit field on invoice? If I do use this field is there a way to make the deposit appear on the payment transaction report?

[@MrDallasjmoody]

Thanks for this video. Trying to use method 2 and your video is the clearest available on prices. I process my invoicing via Ruddr and now I understand what I need to do to deferred revenue in QBO to get it to align. Thanks!

[@HectorGarciaCPA]

:)

[@cm4644]

See Min 20:19 - I believe turning off the 'automatic apply credits' feature only applies to customer unapplied cash payments that didn't have a place to be applied to previously. A payment from a customer that has one or more open invoices applies automatically to the oldest invoice first, but leaves the option to allocate the payment before saving it.

[@lilyrincon3272]

Thank you so much for such great information! You are the best!

[@yolandacastillo2368]

EXCELLENT EXPLANATION. EXCELLENT SOLUTION FOR REPORT AND PAY SALES TAX USING THE TYPE OF REVENUE INVOICES. EXCELLENT VIDEO Sr. I DRIVING ALL DAYS LISTEN YOUR VIDEOS. YOU HAVE A WAY SUPER BRILLIANT TO EXPLAIN. WHAT ELSE I CAN SAY. YOU ARE THE BEST. THANK YOU FOR ALL

[@bdesilva]

@hector Thanks for the great video. I use Quickbooks online and QB Time. This q is about both QB Time handling and invoicing. The scenario I need help with is similar to a retainer, which I find easy to handle using retainer and retainer-applied items. I have support agreements with a minimum charge. So, for example, I have a client who pays $9000 per month for UP TO 60 hours of time. I invoice that 9000 up front and then we work. If we track in QB time work

[@HectorGarciaCPA]

I dont have enough experience on these to guide on it.

[@Alltech-b7n]

Thanks for the video as method 2 will really help clean up out P&L. I think. So i have an issue in desktop where it tells me that i can't enter a negative value. Is this just a desktop issue? So we have products that use raw material. That material is included in the part price but the customer pays for bulk of that material upfront. So for example, we purchase $10,000 worth of material, customer pays me for that material. We then make parts over time using that material and charge $5 per part. $3 of that part is material. So I make the customer 100 parts. Charge them $500 and need to credit them back $300 all in one invoice and the credit needs to be visible on the invoice. Method 2 looks like it should work for this except it won't let me put in negative values. Thanks again.

[@HectorGarciaCPA]

:)

[@natalyosio9608]

What happen where you live in a state where lawn services are taxed? how would you apply the second method?

[@HectorGarciaCPA]

You pay the whole sales tax when you invoice the final invoice

[@windwave42]

hello! when i did this exact method, we were forced into making a sales receipt and then weren't able to apply said sales receipt to an invoice

[@HectorGarciaCPA]

Sales receipts cannot be applied to invoices

[@user-yb1or2jf7y]

This video is very educational, along with your other videos. Thanks for all you do! In Method #2, when reconciling bank balances it does not match anymore. For example, in the balance sheet the $25k is not shown in the bank, but in Customer Deposits Liability. How would you reconcile your books with this discrepancy?

[@HectorGarciaCPA]

Unfortunately, i dont remember the details at this point. I would need to re-do the excercise

[@daveschroeder5993]

I start each day by downloading transactions through the bank feed. At this time, I discover a customer deposit has been received (I have no prior knowledge of this customer deposit, so I have not done a "receive payment" or anything). In that confirmation step, I select the customer/project and I select the category "Customer deposit" which I have set up as "Other current liabilities", and I confirm the transaction. At some later date, at the time of invoice, how do I apply that deposit to the invoice, and how do I get that money out of the "Customer deposit" category? Been really struggling with this. Thanks for your help!

[@darlakay1280]

Hi Hector. For method #2, how would you apply the prepayment using this method without affecting the state sales tax reporting? With this method, the complete amount including the sales tax pulls through to the Sales tax liability report, making it reportable to the state when receiving payment, but then gets credited back in the invoice in which the prepayment is applied. The problem with this method is the sales tax liability reports will produce an over then under amount to be reported to the state but also won’t match the revenue reporting. The sales tax collection part is pulling through fine, just looks like the gross totals and time periods won’t match the revenue. Any suggestions?

[@HectorGarciaCPA]

@@darlakay1280 you would have the liability 100% when invoice is issues

[@markwaugh2613]

How do I accept a check from a customer after job is complete and add it into qb?

[@HectorGarciaCPA]

@@markwaugh2613 invoice it, so you can receive the payment

[@cedricmataso2446]

Personnally like the negative A/R

[@HectorGarciaCPA]

Agree

[@atiqabanu1088]

can we apply II method withour estimate?

[@HectorGarciaCPA]

Yes

[@fmaa-bt2gx]

When I do the negative A/R way. It puts my reconciliation out of order

[@HectorGarciaCPA]

It shouldn’t

[@solangedotro718]

Gracias! Muy claro! Pero la aplicacion de credito automatico dejo de funcionar en mi QBO. Tenes idea porque?

[@atiqabanu1088]

nice explanation but II method is lengthy and complicated better we touch customer deposit through sales receipt interface.

[@nataliafredes9600]

Hi Hector! Thank you so much for this video. Should I use a Sale Receipts instead a create an Invoice? Is it the same?

[@HectorGarciaCPA]

Depends if you get paid as a separate event (invoice) or immediately (sales receipt)

[@melvin_0bviously]

I absolutely love that you give the rationale for why the other current liability method would work better when looking at the balance sheet

[@karenbertrand5861]

If your invoice has multiple lines hitting multiple revenue accounts and the deposit doesn't cover the total of the invoice, is there a way to specify how you want the deposit applied?

[@HectorGarciaCPA]

No

[@andyc7141]

Thank you so much for this informative video. I have a question, If you need to fully refund or partially refund a deposit, how would you go about it?

[@HectorGarciaCPA]

Write a Check to the customer using the same account used on the Deposit transaction

[@andyc7141]

@@HectorGarciaCPA if I just simply write a check, it won’t correct the invoice created with the deposit amount. How would I make the adjustment in the invoices?

[@anachavez7982]

Hi Hector, how to create an invoice with a retaining fee that we are not going to get paid?

[@HectorGarciaCPA]

If you are not going to get paid, why would you create an invoice?

[@susannalopresti1347]

This video was long but excellent. Thank you. One question I have is, will this work the same way in QB Desktop? In particular will I be able to run the liability report by customer like you did and can I use tags on the invoices like you did. Are these features specific to QBO?

[@HectorGarciaCPA]

Desktop has no Tags

[@RaageOnlineAcademy]

How quickbooks online set up printing in A5 paper when invoice is printed?

[@HectorGarciaCPA]

Never done it

[@lalutahsin9119]

HI....I am Lalu Tahsin from Lombok Indonesia, how to Create COA between Hotel and constreuction bussiness?

[@HectorGarciaCPA]

I dont have a video in that

[@igmuthakaihable144]

What if it's a non refundable deposit? Can I categorize it as revenue from the beginning since I will keep the money deposit regardless?

[@HectorGarciaCPA]

Yes.. non-refundable deposits are income

[@igmuthakaihable144]

@@HectorGarciaCPA thank you! After I invoice them for the non refundable deposit, how do I invoice them for the rest of their payment when it's due? Do I discount them the non refundable deposit in the invoice ajd make a note saying it's bc they already paid that part? Or can I make it a negative line item? Etc....?

[@matthewdaecher4734]

I receive payments in advance for various jobs. My accounting is cash basis. Is it better to use the retainer method or this negative accounts receivable method? The AR part doesn't apply because I am on cash basis, but what would be your preference?

[@narsimhakalluri7263]

how can i sed automatic payment reminder to customer.

[@CBdoesthebooks]

Thank you for all your videos - you are my favorite QB expert to watch! I have implemented the second method in this video, but now find that my AR report is out of whack as both the rev recognition and the deposit invoices are showing on the report. If my client hasn't paid but I've completed the work and recorded the revenue, the AR report indicates that my client owes me double. Is there any solution for this?

[@user-df8yh7ql3n]

Hector, for retainers, the liability detail report that you show for all 3 customers is great, but when the customer uses all the retainer but the invoice still has outstanding balances, the money used doesn't move to revenue from the liability. It will still show the liability overstated. Also, when you repay that remaining balance, I'm getting a ($) in the balance in the report as well. How can I avoid my liability report being overstated?

[@HectorGarciaCPA]

A journal entry can be used to adjust to zero

[@EileenSeely]

It will eventually zero out but I’m asking why the delay until the invoice is paid 100?

[@HectorGarciaCPA]

@@EileenSeely cant follow your question

[@magiadigitalchicago7227]

Hi Hector. I follow you and i am very thankful for all your help with the videos. I am beginning a new business renting parking spots for trucks. So I need to collect the monthly rent from custmer A, for use the spot A1. I create all my customers and the spots as my Items list. So my invoice is to the customer for the rent of this month for spot A1. My problem is how to get a report of all my spots to know which are paid or not. Thanks for your help. Fernando Fuentes

[@ibrarahmad795]

Hi Hector, Suppose I have a supplier one invoice for annual rent but as of now I didn't make payment to them. I just want to amortize that expenses over a year, please advise how to post that entry into quickbook online.

[@marcogonzalez967]

Hi Hector, thank for all the information. One question, what happens if I have a separate bank account just for the “clients deposits”, is the process the same? My two bank accounts: checkings and my clients account, are linked to quickbooks. How can I deal with the bank feeds from each account? I make the transfer from the clients account to my checkings account once the services is completed and agreed by the client. Hope this question makes sense. Thank you in advance

[@husseinabdihakim144]

Iam setting up QuickBooks with your vedio and i needed your help on this matter. When creating estimates what would i write in the description when we don't have payment schedule. For example they have paid 20% of the deposits upfront and they can complete the balance anytime. Pls respond it urgent

[@HectorGarciaCPA]

We do it with notes, give the customer instructions on how much to pay in the item description or memo

[@quentonwhitcomb234]

Why do you use an Invoice with a negative amount, rather than a journal entry moving the funds from Customer Deposits to Income?

[@HectorGarciaCPA]

Journal entries are cumbersome

[@roberte.herrera1532]

Thanks… ASC-606 and ASU 2018-08 impact is real.

[@HectorGarciaCPA]

I’m not an accounting standards expert. But what do you think about how the video is organized?

[@roberte.herrera1532]

I really enjoy the way you organize the videos, present, speed of delivery and practitioner insights… well done hermano

[@user-kl8zi3ps3f]

Hi Hector! I really apprechiate your lesson, but I do not get answer to my question. I make the invoices for customer before hand , for the future 3-6 months and I need to defferal this revenue to the according periods to make the correct P&L etc. How can I do this ? I have different invoices for defferent periods and customers with different services inside . Can I add something to invoice in order it will split this revenue to the correct periods. Thank you in advance

[@melissaduerr1727]

We turn estimates into orders and send an order acknowledgement and then invoice 50% deposit on the order amount and then the final is due prior to shipping. How can QB due the 50% deposit and not record revenue? Both of the above options don't really work for us.

[@HectorGarciaCPA]

No, it doesn’t have something between an estimate and an invoice….

[@andresmanon5907]

Hector, I own a beauty salon, where we take deposits to secure the appointments, I also sell gift cards, and I also have a membership program where I presale services at a discounted price if they enroll in a monthly CC auto draft. I have a POS where I have all the details by customer transaction. Now, my question is what kind of sales receipt should I create on QBO to correctly record all the payments ( I am clear with Cash and Credit Cards), But I am not sure how to register the liabilities of selling gift cards or prepaid services; and at the end of the day when the customer has used their credits to pay, what do I need to do?

[@HectorGarciaCPA]

You might need a one on one Consultation to look at all the moving parts and suggest the proper workflow.

[@andresmanon5907]

@@HectorGarciaCPA , thanks for your prompt response. How can I get in contact with you for this?

[@abnersabido3955]

Hello Hector, great video. I do have one question I am hoping you can answer. What TB account is the product/service "Hours" when you create the Estimate in the beginning of the video mapped to? I ask this because, I assume (I could be wrong), that when you save the $100,000 Estimate the $100,000 will appear on the financial statements based on which TB account "Hours" is mapped to. Thank you! (Nevermind I just saved a $100,000 estimate and it did not appear to the account the product/service was mapped to.)

[@yorlic.8205]

Excelente video, seria genial que fuera uno en español, felicidades y éxitos.

[@HectorGarciaCPA]

No lo va haber.

[@2024MsMs]

Excellent! Thank you!

[@Rig29G]

Nice Videos, is it possible to invoice one customer, but 2 or more projects?

[@HectorGarciaCPA]

No

[@tayloresters5703]

Hi Hector! Your videos are so helpful, thank you! I am having issues with how I can use method #2 but still get the initial $25k payment from the customer to still show as income for Cash. Is there an additional work around I can add to our process to keep the $25k as income for cash, while I still move it to a liability account for accrual P&L? We also would not want it to show as a credit to the customer's A/R.

[@nekoneko8873]

Shopify orders are already synced to QBO including the old ones. These orders appear overdue, I believe I have to click on "Receive Payment" to have a record of these orders. Since these involves 1500+ orders (Jan - Dec 2022), do I still have to add a payment method to each order and to which account the payment was deposited? Thanks!

[@HectorGarciaCPA]

Cleaning these up is a whole ordeal, very hard to explain via a text message like this

[@janeh5949]

O my gosh. I just saw this and it is an answer to prayer. i have a new landscaping client and they receive prepayments before they begin work. I KNOW how to record this properly by looking at QB support videos , here and other places, but I have to clean up a few of these prepayments from prior bookkeeper . there is a non-inventory item set up for "customer deposits" and in the set up of this item, it points to an Income account-called you guessed it...Customer Deposits, which is a liability account. Is that correct in the set up of a product/service that will be a liability?? the b/S has a few customers prepayments and I need to remove them from the cust. dep. liability account and clean this up. How do I do this without just making a j/e? I want my client to know i know what was done and how to properly do it going forward. I need to know by tomorrow morning! any suggestions? I can pay for hourly support.

[@HectorGarciaCPA]

Customer Deposits are liabilities until they are transferred to income (when the work is done) We offer training/support: Calendly.com/qbkaccounting

[@melissaalvarado8489]

Excellent video! How would this method apply for clients on a monthly payment plan?

[@HectorGarciaCPA]

No, that’s kinda the opposite

[@janeh5949]

at some time,, the $ has to be taken from the Trust account and put into business operating because you have earned it . just do a transfer?

[@HectorGarciaCPA]

Yes

[@gritchenarcamo6739]

How to make a transfer? When I do the 2nd step.. it was taken from my liability but negative now in my A/R

[@rezartsheqeri5551]

Hi Hector. How do you treat a restaurant house account? Like customers make deposits to their house account with the establishment, and then they have events later (dinners, parties, etc), using these funds. Thank you!

[@HectorGarciaCPA]

This one is not my specialty

[@marytaelliott]

Thank you!!!!!

[@HectorGarciaCPA]

:)

[@shireensdavlogs8051]

Hi Hector. Would these methods work if the sales tax center is set up in QuickBooks Online? Thanks for the videos.

[@HectorGarciaCPA]

It should

[@kimberlypearson2018]

I’m thinking the current liability method would work for an attorney trust account. How would you keep track of the expenses that are paid on behalf of the client from that trust account?

[@HectorGarciaCPA]

Same way… you make the expense/check and hit the liability account

[@kimberlypearson2018]

@@HectorGarciaCPA thank you. I really enjoy watching your videos!!

[@InfiniteClouds]

Hi Hector, it's great that option 2 allows you to delay showing the cash as revenue until the work is completed and therefore hiding it on your PnL while showing it on your balance sheet. However, is there a way to do the same with expenses paid for the same job? I.e. I pay a subcontractor $2000 for the same job and I don't want to show this expense until I'm also showing the revenue. So that if I'm taking deposits and paying subs I don't have a wild fluctuation of expenses and revenues caused by paying subs weeks or months before completion and full collection of payment from customer?

[@HectorGarciaCPA]

Same thing. Use an item that hits the balance sheet; you can use a current asset called “prepaid expense” or “WIP”

[@debbiejanzen9528]

I REALLY appreciate your informative videos! Thank you! I am migrating our Construction Company to QBO in March, so I am getting ready by watching your videos! Question: in my QB Desktop- after a Customer pays a Deposit- I make a separate Journal Entry from their Deposit on the Balance Sheet to "Accounts Receivable" (with their Customer 'name' in drop down) - this way I can send Project Cost Invoices to customers with out having to put a line on invoice with "negative" amount- and then pay the invoice with "available credits". WIll I be able to perform this Journal Entry in QBO? It works so well. (CR Accounts Receivable & DR Client Deposit). Thank you!!

[@HectorGarciaCPA]

Journal entry or Credit Memo is the only way to keep it out of the invoice lines

[@debbiejanzen9528]

@@HectorGarciaCPA Thank you!

[@Mareby71]

Hector, is there a way to Invoice two different customers from one Estimate?

[@HectorGarciaCPA]

No

[@fritzmann210]

Good Day sir Can Expense/Check Voucher forms be edited?

[@HectorGarciaCPA]

The ones you print? No..

[@amberjacobs1895]

Can I not use the Credit Memo or Delayed Charges for customer deposits?

[@HectorGarciaCPA]

Credit memo could

[@Makeupaddict026]

@@HectorGarciaCPA could you please explain the credit memo method? So if I receive the deposit before shipment is shipped out. Would I create an invoice hitting the “customer deposit” account and apply the payment to that invoice and then I would create a credit memo right after hitting the “customer deposit” account and once shipment ships I will create a new invoice and apply that credit memo against that invoice. Is this the credit memo method?

[@sherymcfadden9224]

How can I run a report to show the balances (by customer) in the Customer Deposit account? I created a Transaction Detail report but it shows ALL the activity. I just want to see balances on hand. HELP! TIA. :-)

[@HectorGarciaCPA]

If you are on Simple Start you cant. But on Essentials and above, you should be able do the report

[@sherymcfadden9224]

@@HectorGarciaCPA We are QB Plus...I can run a detailed transaction report by customer, but it gives me ALL the transaction details, even if their end balance is zero. SO frustrating. I cannot find a filter that would eliminate that. I want to see a report that consists ONLY of customers for whom I currently have a deposit on hand...like an A/R or A/P aging summary...but for Deposits! Any thoughts? THANKS!

[@HectorGarciaCPA]

@@sherymcfadden9224 i see… detailed reports dont have a mechanism for zeroing out groups, that would be nice, but not a thing :). Same limitation exists in QB desktop

[@sherymcfadden9224]

@@HectorGarciaCPA Do you know a way to run a summary report for one account? So a summary by customer of the G/L account "Customer Deposits"?

[@snowshepard]

Do you have subscription plan for QuickBooks Desktop ?

[@HectorGarciaCPA]

Desktop has annual subscription plans

[@snowshepard]

@@HectorGarciaCPA is your website down ? Would you post a link to the desktop classes/subscriptions ? I googled when you site was down but it appears your name is popular

[@jacquelinevulcano2215]

I've been using Quickbooks for years and have never heard of it being FREE. Free trial does not count.

[@HectorGarciaCPA]

It’s never been free for regular users. But accountants get a free account for their firms.

[@konaboyz1690]

God bless fast forward :))))))))))))))

[@HectorGarciaCPA]

Totally… my videos are way too long

[@snowshepard]

@@HectorGarciaCPA not really too long. It is nice to get the details in case you are not aware or need a reminder. Or just to clarify everything. It would be nice if you could clip just the process (without all the extra explanation) and make a highlight video of the process, for when only that is needed

[@chereepeterson7477]

At 35:06 you show a Customer Deposits Liability report that you customized from double clicking on the Liability Balance on the Balance Sheet. The total column represents the activity in the period of the report (ie Jan - Dec 2021). The Balance column represents any beginning balance +/- the activity for the period of the report. Since none of your accounts has a beginning balance these two are the same, so when you collapse the customers - you can see in the total column the $55K that ties to your balance sheet. I need this report but since my customers have prepaid balances carrying forward from a prior period, I can no longer use the Total Column to get their remaining prepaid balance. I need to include the Balance Forward, +/- the activity for the period of the report summed to get Ending Balance. The problem is when you collapse the customers, the total row (in your example ABC Customer in BOLD) does not show anything in the Balance column for that row. So if there are 100s of subcustomers I have to manually add up to see what the Ending Balance for the parent customer is. Also, in the Balance column there is no grand total for ALL customers that ties back to the Customer Deposits Liability Account. I can only see the Total for the current period which does not include any Beginning Balances. Is there a way to modify this report to get that info or run a different report that would show me that?

[@HectorGarciaCPA]

I dont think we can :(

[@claudinehumphries9910]

Just migrated from QB desktop to QBO yesterday. Help I need to file 941 and the payroll tab in QBO is nothing like the desktop. What am I missing? I can’t figure out how to file the taxes. Yes I connected to the bank. Is it automatic? I need to know the amount that will be withdrawn so I have the funds available! Thank you

[@HectorGarciaCPA]

For payroll you need to contact Intuit for support

[@claudinehumphries9910]

@@HectorGarciaCPA thank you for the quick reply. They didn’t tell me they wouldn’t be available 24/7!