How to Record Customer Deposits in QuickBooks Online

A customer deposit can be best defined as cash paid to a company by a customer. For this, the company […]

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A customer deposit can be best defined as cash paid to a company by a customer. For this, the company has not yet provided goods or services in exchange yet. With customer deposits, the company takes an obligation to provide the promised goods or services. If the provision cannot be completed, then funds are to be returned. For example, a mere customer asks a retailer to reserve a cufflink for him, to be picked up a month later. The retailer will need the payment of a customer deposit before it will agree to hold the product. Know how to record customer deposits in QuickBooks Online.

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Several of the company owners have been receiving deposits from customers for various services or products that have not yet been delivered. As a part of the system, you may receive deposits for rentals, real estate purchases and goods of equivalent values. All of such deposits get recorded in QuickBooks Online in a pretty specific way. Small deposits for jobs that will be completed a little bit faster followed by the booking can be recorded directly in a customer invoice.

Turn-On the Deposits Field in the QuickBooks Online Customer Invoices:

For quick and small jobs that have little or no risk, you can choose the turn-on or in-built “Deposits” feature. Here is the process mentioned:

  • In QuickBooks Online, you need to go on the tab of “Account and Settings“,
  • Go to “Sales” and “Sales from content“, then turn-on “Deposit“.
  • This will add a “Deposit” field in order to your Invoice. This way you can enter the deposit amount received and it will reduce the outstanding balance of the invoice.

Many professional service providers may take small deposits for scheduled services with established and agreed delivery dates in near future.

Addition of Product and Service Items to the Generated Customer Invoices

It is crucial to add the actual product or service item, or any of the billable expenses to your customer invoices that are to be generated. This should be done before adding any deposit amounts received.

Addition of Received Deposits to Customer Invoices

Once you have added the deposit to the customer invoice, it will immediately become an income for your business. For this, you need to select either the option of bank or undeposited funds if the payment was included with other deposits which were made that day. This process will work best once you are ready to make a customer invoice, and have already received money. The balance gets redacted from the deposit and will appear on the invoice as outstanding until paid.

Process of Creating the Liability Account, Product and Service Item, Sales Receipt and Invoice

Most companies prefer to record deposits as an “Other Current Liability“. As per this concept, when you are accepting the money from your customer as a deposit it will not be considered income. This money is not considered to be yours until you have earned it. If the job gets canceled or not completed for some reason, you will have to give the money back. At times, you can also negotiate a contract for a non-refundable deposit or barter system in which you pay through your services.

Create Liability Account for Customer Deposits Received

The first step is to create a “Customer Deposits that are received” account within your chart of accounts in the QuickBooks program.

Entering the Product and Service Item for Deposit or Retainer Liability

The next step is to create a Product and Service item with the name “Customer Deposit“, mapping the “Income account” to the “Customer Deposit Liability” account.

Create Sales Receipt Receive Customer Deposit/Retainer

You need to create a Sales Receipt on the basis of this “Customer Deposit” item. This will place the customer deposit into this liability account and will give a better idea of inflow and outflow on your Balance Sheet.

Create Invoice and Subtract Received Deposit/Retainer Amount

When the time comes to progress the bill or final invoice to your customer you will add the same product and service item for “Customer Deposit” and subtract the amount as the last line item on the invoice. This will show only the remaining outstanding balance in the customer invoice. This will move the deposit from the liability account and bring it to the income records.

Step 1: Entering the Payments into the Undeposited Funds account.

If you haven’t already done this, then you need to put the transactions you want to combine under the Undeposited Funds account.

Step 2: Recording a Bank Deposit in the QuickBooks to Combine Payments.

Once you have your slip of the deposited balance from your bank, you’re ready to record.

  • On the Homepage, you need to choose Record Deposits/Make Deposits.
  • In the Payments to Deposit window, you need to select the payments you wish to combine. Then select OK.
  • In the Deposits window, you need to select the account you wish to put the deposit into. You will be able to see it in the drop down list.
  • Check the deposit total. You should ensure the account and selected payments should match the deposit slip from your bank. Your deposit slip can also be used as a reference.
  • You need to enter the date you have deposited the balance at your bank.
  • Add a memo as needed.
  • When you’re done, select Save & Close.
  • Each bank deposit is a separate record. You should enter deposits one at a time for each of your deposit slips.

Next steps:

  • Manage your bank deposits
  • Review past bank deposits

In order to see past deposits and the transactions you combined:

  • Select the Reports menu. Then select the Report Center.
  • Select the Banking section.
  • Look for the Deposit Detail report, then you need to select the Run icon.
  • This report lists all of your recorded bank deposits. You can choose the individual deposits to get more details.

Delete a Bank Deposit

If ever you need to retrace your steps and start over, you can delete a bank deposit:

  • Select the Reports menu. Then select the Report Center.
  • Select the Banking section.
  • Find the Deposit Detail report. Then select the Run icon.
  • Locate and open the specific deposit you want to delete.
  • In the window of Make Deposits, you’ll see all the payments included on the deposit. You also need to review them and ensure that you need to start over.
  • Right-click in the window and select Delete deposit. Select OK to confirm.
  • All payments on the deposit should go back to your Undeposited Funds account. You can also start over and create a new deposit as a fix.

Record Recurring Deposits

If you are in habit of recording the same deposits regularly, you can also make an existing deposit as a recurring transaction:

  • You need to click on the Banking menu and then go to the Register.
  • Search for and open an existing deposit.
  • Right-click the deposit and select Memorize Deposit.
  • You need to select the Automate Transaction Entry if you want QuickBooks to record the deposit automatically. Otherwise, you just need to select Add to my Reminders List to get a notification for deposit creation.
  • In the dropdown of How Often, you need to choose the frequency (monthly, weekly, daily, etc).
  • In the Next Date section, you should set the start date for the recurring deposits. The first recurring deposit will start on the first chosen day.
  • In the field of Number Remaining section, you should enter how many deposits you want to create in QuickBooks.
  • In the field of Days In Advance, you can set how many days in advance should be recorded by QuickBooks the deposit. Initially, you need to enter 0 if you want to record the deposit on the day you choose.
  • When you’re done, select the OK button.

After this, QuickBooks will start recording automatically the deposit on the date and frequency you have kept in preference.

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