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Invoice and Sales Form Basics

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When business is going well, that means invoices and sales receipts are being created all the time. Recording sales is one of the most frequent and important accounting practices, so we want to make sure you have all the information you need. 

Whenever you make a sale...

  • And expect to be paid in the future, you should create an invoice.  Once the invoice is paid, you receive the payment against the invoice in QuickBooks.  
  • And are paid at the time of sale, you'll create a sales receipt. Since you’ve already been paid, you skip the "receive payment" step.

Note: Being new to QuickBooks Online doesn't mean you’re new to recording business transactions.  If you have hundreds of historical transactions you'd like to enter into your new account, enter them as sales receipts. Remember, for upcoming customer sales that have yet to be paid, create invoices. 

Before you start sending invoices or recording sales, you need to set up your products and services list. When you create a product or service, you need to designate an income account. Keep in mind, the income account is used to record the income from the sale of the product or service. This account isn't where the payment for the sale ends up - that comes later. 

If you need a refresher on setting up your products and services lists, here are some useful links to walk you through:

Ok, let’s start making those sales forms!

Invoices

There are a few ways to create invoices in QuickBooks. 

  • The most common way is to click +New and select Invoice under Customers.
  • In the Sales Tab, you can click Create Invoice from the customer list so their information is automatically added to the form.

If you’ve already created an estimate, the best next step is to convert it into an invoice. Go to the Sales Tab and choose Create Invoice to the right of the estimate. This ensures you're working from the same transaction throughout this process.

Invoice from estimate.png

The basic workflow for invoices is simple: send an invoice, receive the payment, and then deposit it into an account in QuickBooks.

Tip: Pay close attention to the receive payment step. This is unique to the QuickBooks accounting workflow. You must receive payments for an invoice in order to accurately process and deposit that money into an account. 

There are many fields that you can use on your sales forms like the date, due date, payment terms, and other details. These are pretty self-explanatory, but I want to take some time to go over your invoice terms. Invoice payment terms are an agreement between you and your customers regarding when invoice payments are due. “Net” refers to the number of days before the expected payment. Adjust your payment terms to fit the pace of your business, industry, and your relationship with your customers. Your goal is to find what works for both you and your customers. 

Invoice Net Terms.png

You can also set your default Terms in the Gear Icon> Your Company> Account and Settings.

Invoice Gif.gif

Once everything is filled out, you hit Save and Send, so your customer receives a copy, or Save and Close to finish your work later on.

The next step in our invoicing journey is to receive payment for that invoice. You can do this by going to Sales> Customers and finding the customer name. Once you select the right customer, find the invoice and choose Receive Payment on the right.

Invoice Receive Payment.png

Or you can go to the +New button and choose Receive Payment. Once you enter in the customer's name, all open invoices will populate and you can choose which one to apply payment to. 

Invoice Recieve Payment 2.png

What account you choose in the Deposit To field is very important. If your customer’s payment went right into your checking, choose that account when receiving payment. If you usually make a deposit into your back that’s made up of multiple payments, choose Undeposited funds. This is a temporary account that holds payments you plan to deposit later so that you can combine them into a single deposit. Whichever you choose, make sure it matches what you do in real life.

Sales Receipts

Now it’s time to shift gears and talk about Sales Receipts. To create one, head back over to +New and choose Sales Receipt. You'll notice right away that sales receipts are nearly identical to invoices with one key difference. The Deposit To field is present on a sales receipt form, but not on an invoice form. If that field sounds familiar, it’s because it does appear in the Receive Payment step of invoicing.

Invoice Sales REceipt.png

Once again, the account you choose is important. For example, if you have two separate transactions in QuickBooks for $50 each but you made a single $100 deposit to your bank, you’d want to deposit the two transactions to your Undeposited Funds Account and then process them together.

This will make reconciling easier because the amount recorded in QuickBooks will be an exact match to what you see in your bank account. While it initially seems like extra work, the Undeposited Funds account is a very useful organizational tool (and safety net to help you manage payments) when you’re dealing with hundreds of transactions every day.

I hope you feel empowered to create sales forms and to confidently record where the money flows. If not, you know we always got you covered here in the QuickBooks Community!

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