I'm glad you raised this invoice overpayment issue here, @SammTax. Allow me to guide you on how to record this correctly in QuickBooks Online (QBO).
Please know that once an overpayment shows in QuickBooks, the system will automatically treat that as a credit for that particular customer, and it will remain open until a new invoice is created.
To handle this correctly, you can refund your customer's overpayment via Cheque or Expense. This reduces your bank's balance and offsets the customer's open credit, overpayment, or prepayment. Here's how:
- Click the + New icon.
- Select Expense or Cheque.
- Pick the customer you want to refund from the Payee ▼ dropdown.
- From the Payment account ▼ dropdown, select the bank account where you deposited the overpayment.
- On the first line of the Category column, select Accounts Receivable.
- Enter how much you want to refund in the Amount field.
- Fill out the other fields as you see fit, then select Save and close.
After that, you'll need to link the refund to the customer overpayment. Feel free to follow the steps below:
- Go back to the + New and select Receive payment.
- Choose the same customer you used for the cheque or expense when recording the refund.
- Fill out the other fields as you see fit.
- Under the Outstanding Transactions section, tick the box for the Expense or Cheque you created when recording the refund. If you have automation to apply bill payments turned on, this step is done for you.
- Make sure the payment is equal to the open balance, then select Save and close.
For more information, you can read this article: Handle customer overpayments in QuickBooks Online.
If you want to learn how to pair up your real-life bank balance and QuickBooks balance, you can visit this article: Match online bank transactions in QuickBooks Online.
Feel free to return here if you have additional questions about handling invoice overpayment by leaving a comment below. We'll be happy to assist you. Keep safe, and have a good one.
