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Intuit
4 helpful votes

Track customer loans

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.

Option 1: Loan to close all open invoices

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

  1. Select the Gear icon at the top, then Chart of Accounts.
  2. From the upper left, select New.
  3. Set the Account Type to either Other Current Assets or Current Assets.Note:
    • Create an Other Current Asset if the loan is to be repaid within the current financial year.
    • Create an Other Asset if the loan will be repaid after the current financial year.
  4. Choose Loans to Others in the Detail Type drop-down.
  5. Add a recognisable 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 the + New button.
  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. Select the Gear icon at the top, then Chart of Accounts.
  2. From the upper left, select New.
  3. Set the Account Type to either Other Current Assets or Current Assets.Note:
    • Create an Other Current Asset if the loan is to be repaid within the current financial year.
    • Create an Other Asset if the loan will be repaid after the current financial year.
  4. Choose Loans to Others in the Detail Type drop-down.
  5. Add a recognisable name like "Customer Loan-Lastname".
  6. Select Save and close without entering an opening balance.

Step 2: Issue a cheque for the loan

  1. Select the + New button.
  2. Select Cheques.
  3. Select the account used to fund the loan (Example: Checking or Money Market) for Bank Account.
  4. Choose the account used to track the loan as the off setting 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 the + New button.
  2. Select Bank Deposits.
  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
    • Pmt Method: Choose cheque, cash etc.
    • Ref #:Enter the cheque number
    • Class: If you are using Class tracking
    • Amount: Amount of the cheque
  5. Select Save and close.

You can also create a recurring invoice for your customer for monthly payments.

Step 1: Create a product service item

  1. Select the Gear icon at the top, then 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 drop-down, choose the customer's loan receivable account.

Step 2: Create the recurring invoice

  1. Select the Gear icon at the top, then Recurring Transactions.
  2. At the top right, select New.
  3. From the transaction type drop-down select Invoice, then OK.
  4. Choose the name of the customer from the Customer drop-down.
  5. From the Product/Service drop-down, choose the Loan Payment Due item.
  6. Select Edit Schedule, then enter your desired schedule.
  7. Select OK, then Save template.

Step 3: Receive customer payments

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

Step 4: Enter the deposit and adjust for interest received

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 the + New button.
  2. Select Bank Deposit.
  3. Select the payment.
  4. In the Add New Deposits section, choose the loan payable account from the Account drop-down.
  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.

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