Track customer loans in QuickBooks Online

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: Use loans to close open invoices

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

1. Go to Settings and select Chart of accounts.
2. Select New.
3. Set the Account Type to either Current Assets or Non-Current Assets.
   Note:
   • Create a Current Asset account with the detail type Loans to Others if the loan is to be repaid within the current financial year.
   • Create a Non-Current Asset account with the detail type Other Non-Current Assets if the loan will be repaid after the current financial year.
4. Add a recognisable name like "Customer Loan-Lastname".
5. 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 Debtors (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 and select Chart of accounts.
2. Select New.
3. Set the Account Type to either Current Assets or Non-Current Assets.
   Note:
   • Create a Current Asset account with the detail type 'Loans to Others' if the loan is to be repaid within the current financial year.
   • Create a Non-Current Asset account with the detail type 'Other Non-Current Assets' if the loan will be repaid after the current financial year.
4. Choose Loans to Others in the Detail Type dropdown.
5. Add a recognisable 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: current 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.