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Track customer loans in QuickBooks Online

by Intuit Updated 1 month ago

The first step to recording a loan for a customer is to determine the purpose of the loan:

  • Are you going to use the loan to close all open invoices? Follow the steps here.
  • Is the loan intended for other purposes (regardless of whether or not it is a customer) and you intend to write a cheque? Follow the steps here.

In this article, you'll learn how to:



Option 1: Use loans to close open invoices

Step 1: Create an account to track the loan and its repayment

  1. Go to Settings Settings gear icon. and select Chart of accounts.
  2. Select New.
  3. Set the Account Type to Current Assets.
  4. Choose Loans to Others in the Detail Type dropdown.
  5. Add a recognizable name like "Customer Loan-Lastname".
  6. Select Save and Close without entering an opening balance.

Step 2: Create a journal entry

This journal entry will establish the opening balance of the loan and create a credit in Accounts Receivable for that customer. You can then apply the credit to open invoices.

  1. Select + New.
  2. Select Journal entry.
  3. On the first line, add the customer loan account in the Account field, then the loan amount in the debit field.
  4. On the second line, add the Accounts Receivable account in the Account field, then the customer's name in the Name field.
  5. Select Save and close.


Option 2: Issue a multi-purpose loan to your customer

Step 1: Create an account to track the loan and its repayment

  1. Go to Settings Settings gear icon. and select Chart of accounts.
  2. Select New.
  3. Set the Account Type to Current Assets.
  4. Choose Loans to Others in the Detail Type dropdown.
  5. Add a recognizable name like "Customer Loan-Lastname".
  6. Select Save and Close without entering an opening balance.

Step 2: Issue a check for the loan

  1. Select + New.
  2. Select Cheque.
  3. Select the account used to fund the loan (Example: chequing or Money Market) for Bank Account.
  4. In the Category details section, select the account used to track the loan as the offsetting account.
  5. Enter the amount.
  6. Select Save and close.

Step 3: Record customer payments

Important:

  • If you're charging the customer with interest, enter the principal amount of the payment on the first line. On the second line, use your Interest Income account and enter the amount of the interest.
  • QuickBooks Online (QBO) does not calculate interest automatically. To manually calculate the interest due on the current payment, take the loan balance and multiply by the interest percentage, then divide by 12 for one month’s interest.
  1. Select + New.
  2. Select Bank deposit.
  3. Make sure the appropriate Deposit to account is selected.
  4. In the Add funds to this deposit section, enter the following information:
    • Received from: Customer Name
    • Account: The customer loan account
    • Memo: Enter a memo that helps record-keeping
    • Payment Method: Choose cheque, cash etc.
    • Ref No.:Enter the cheque number
    • Class: If you are using Class tracking
    • Amount: Amount of the cheque
  5. Select Save and close.


Create a recurring invoice for your customer's monthly payments

Step 1: Create a service item

  1. Go to ​Settings Settings gear icon.and select Products and services.
  2. From the top right select New, then Service.
  3. Enter the item name (Example: Loan Payment Due).
  4. In the Income account dropdown, choose the customer's loan receivable account.
  5. Select Save and close.

Step 2: Create a recurring invoice

  1. Go to Settings Settings gear icon.and select Recurring transactions.
  2. Select New.
  3. From the Transaction type dropdown select Invoice, then OK.
  4. From the Type dropdown, select Scheduled.
  5. Select the name of the customer from the Customer dropdown.
  6. Go to interval and enter your desired schedule.
  7. From the Product/Service dropdown, choose the Loan Payment Due item.
  8. Select Save template.

Step 3: Receive customer payments

  1. Select + New.
  2. Select Receive payment.
  3. Enter the payment information.
  4. In the Deposit to dropdown, choose Undeposited Funds.
  5. Select Save and close.

Step 4: Record the deposit and adjust for interests

This adjusts the loan balance from the invoice entry, adding the interest amount back into the loan receivable account and posting the interest to income.

  1. Select + New.
  2. Select Bank deposit.
  3. Select the payment you want to enter and adjust.
  4. In the Add funds to this deposit section, select the loan payable account from the Account dropdown.
  5. Enter the amount of the interest as a negative amount.
  6. On the second line, select the interest income account. Enter the amount as a positive number.
  7. Select Save and close.

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