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Properly entering Sales Commission income and categorizing

I'm committed to mastering Quickbooks properly.  In the past I would enter sales commissions in the check register.  I've read and watched tutorials on how to do this well using accounting principles and as Quickbooks intended it.

The company preferences are set to deposit to undeposited funds by default.

Following the Home page map I: 1) Create the invoice, 2) Receive the Payment, 3) Make Deposits.  Throughout this process I see no place to categorize the income as Commission Income.  the deposit in my check register indicates that the income is from the account "Undeposited Funds."  I try to edit the "From Account" and get the following pop-up "You cannot edit payment information in a deposit transaction. 1) Delete the payment from the deposit. 2) Go to the original payment transaction to edit it. 3) Redeposit the payment."

I've always assumed that it was important to delineate the type of income I'm receiving for reports, is that true?  Or do I just indicate in the memo field that this is a commission received?

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Best answer 12-10-2018

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Established Community Backer ***

"In the past I would enter sales commissions in the check...

"In the past I would enter sales commissions in the check register."

I don't know if this means it is Inflow or outgoing?


That means you are not entering this as income or expense using actual Transactions in the names of customers and vendors, but just "doing the banking" and that means you are using about 5% of the functionality of the program.


"I've read and watched tutorials on how to do this well using accounting principles and as Quickbooks intended it."


Good for you. Look at your Home Page, There are the workflows. Look at the Menus. There are your tools.


"The company preferences are set to deposit to undeposited funds by default."


You control this setting. There are about 200 preferences you shoudl review and set to meet your specific intent.


"Following the Home page map I: 1) Create the invoice,"

Invoice = unpaid sale, as of the date of this invoice = the charges. If you are paid for that same date as the charges, go directly to Sales Receipt, instead.


"2) Receive the Payment,"

If there are open AR charges, you have to use Receive, to apply the payment against the open charges.


"3) Make Deposits."


If you are not having the sales receipts and the payments post directly to the bank register, then you have them holding in UF. This allows you, for instance, to process that a customer paid you on time on the 15th and even some paid you on the 14th, but you didn't take it all to the bank until the 17th. It also gives you one entry in the bank register to match the entry on the bank statement, making it easy to reconcile. There is nothing worse than trying to compare 250 individual deposit entries in the bookkeeping to one entry on a statement, from various dates of processing, but in one deposit date envelope or one large ACH transaction template.

Bookkeeping is easier when it matches reality.


"Throughout this process I see no place to categorize the income as Commission Income."


That is because the Charge Items you use on the Sales Forms control the flow of the data to the accounts. The Deposit is NOT income. It is two or three steps AFTER income has posted. it is just banking, now. It goes like this:

Invoice (posts as income by using items) ==> creates AR balance ==> Receive Payment (reduces AR) ==> Funds for bank ==> Make Deposit


"the deposit in my check register indicates that the income is from the account "Undeposited Funds." "

It is part of the data flow. UF is the Prior Step. That is ALL this indicates, and is correct.


Deposits are NEVER income, by default. Funds are deposited to the bank for all sorts of reasons.


"I try to edit the "From Account" and get the following pop-up "You cannot edit payment information in a deposit transaction. 1) Delete the payment from the deposit. 2) Go to the original payment transaction to edit it. 3) Redeposit the payment." "


You will orphan the data if you keep trying to force it to match your expectation. This is a Program with an interface, meaning tools. The data is a Relational database. UF = "I am on my way to the bank, because of some previous step."


Never mess with UF. It is self-reconciling process.


"I've always assumed that it was important to delineate the type of income I'm receiving for reports, is that true?"

At this time, your existing method gives you NO data for sales reporting at all. I have attached some reports for you as examples of everything you are lacking at the moment.


"Or do I just indicate in the memo field that this is a commission received?"


Try this: Go to the No Company Open screen. Open one of the Sample Files. Look at their Items. Look at their Banking. Look at their Transactions.


Open Help. read on Work With Items. Read on Customer Sales.

7 Comments
Highlighted
Established Community Backer ***

"In the past I would enter sales commissions in the check...

"In the past I would enter sales commissions in the check register."

I don't know if this means it is Inflow or outgoing?


That means you are not entering this as income or expense using actual Transactions in the names of customers and vendors, but just "doing the banking" and that means you are using about 5% of the functionality of the program.


"I've read and watched tutorials on how to do this well using accounting principles and as Quickbooks intended it."


Good for you. Look at your Home Page, There are the workflows. Look at the Menus. There are your tools.


"The company preferences are set to deposit to undeposited funds by default."


You control this setting. There are about 200 preferences you shoudl review and set to meet your specific intent.


"Following the Home page map I: 1) Create the invoice,"

Invoice = unpaid sale, as of the date of this invoice = the charges. If you are paid for that same date as the charges, go directly to Sales Receipt, instead.


"2) Receive the Payment,"

If there are open AR charges, you have to use Receive, to apply the payment against the open charges.


"3) Make Deposits."


If you are not having the sales receipts and the payments post directly to the bank register, then you have them holding in UF. This allows you, for instance, to process that a customer paid you on time on the 15th and even some paid you on the 14th, but you didn't take it all to the bank until the 17th. It also gives you one entry in the bank register to match the entry on the bank statement, making it easy to reconcile. There is nothing worse than trying to compare 250 individual deposit entries in the bookkeeping to one entry on a statement, from various dates of processing, but in one deposit date envelope or one large ACH transaction template.

Bookkeeping is easier when it matches reality.


"Throughout this process I see no place to categorize the income as Commission Income."


That is because the Charge Items you use on the Sales Forms control the flow of the data to the accounts. The Deposit is NOT income. It is two or three steps AFTER income has posted. it is just banking, now. It goes like this:

Invoice (posts as income by using items) ==> creates AR balance ==> Receive Payment (reduces AR) ==> Funds for bank ==> Make Deposit


"the deposit in my check register indicates that the income is from the account "Undeposited Funds." "

It is part of the data flow. UF is the Prior Step. That is ALL this indicates, and is correct.


Deposits are NEVER income, by default. Funds are deposited to the bank for all sorts of reasons.


"I try to edit the "From Account" and get the following pop-up "You cannot edit payment information in a deposit transaction. 1) Delete the payment from the deposit. 2) Go to the original payment transaction to edit it. 3) Redeposit the payment." "


You will orphan the data if you keep trying to force it to match your expectation. This is a Program with an interface, meaning tools. The data is a Relational database. UF = "I am on my way to the bank, because of some previous step."


Never mess with UF. It is self-reconciling process.


"I've always assumed that it was important to delineate the type of income I'm receiving for reports, is that true?"

At this time, your existing method gives you NO data for sales reporting at all. I have attached some reports for you as examples of everything you are lacking at the moment.


"Or do I just indicate in the memo field that this is a commission received?"


Try this: Go to the No Company Open screen. Open one of the Sample Files. Look at their Items. Look at their Banking. Look at their Transactions.


Open Help. read on Work With Items. Read on Customer Sales.

Active Member

Re: "In the past I would enter sales commissions in the check...

I have the same issue. I don't believe this answers the question of receiving a commission check from a vendor for reselling services, does it?  I can't enter an invoice or a sales receipt for an entity on my vendor list. Invoices and Sales receipts only apply to Customers, correct?

 

I have been holding the commission check until I'm ready to go to the bank. I then add the check on the "make deposit" screen, posting to my commissions account at that time. 

 

I don't like doing it that way because I often forget the commission check until AFTER I print the deposit slip, have to toss it, correct it, and reprint, thereby wasting a form. Is there a better way?  I would prefer to post the commission check when I receive it and have it populate the deposit as do the payments I receive from my clients, but have yet to figure out how to do this.

QuickBooks Team

Re: "In the past I would enter sales commissions in the check...

Hi there, LynnBea!

 

Thanks for joining us here in the Community! Qbteachmt is one of the best Allstar (accountant) contributors here, and the answer provided is on-point and correct. Allow me to add up some information specifically to your questions.

 

Though both pertains to tracking commissions in the program, the poster's concern is a bit different from yours. He wanted to enter sales commissions, while you need to record commission checks from vendors.

 

Specifically to his concern, @qbteachmt thoroughly explained and suggested to use invoices or sales receipts instead of checks. You're correct; invoices and sales receipts only apply to customers and sales transactions. 

 

Since you'll want to record the vendor's side, you don't need them. Writing checks is still the best option for you. 

 

Generally, as part of the program's data workflow, the Undeposited Funds account is where you keep the checks. Once you're ready to put them all together in the bank's register, just deposit them. 

 

Ideally, all checks must automatically show in the Make Deposit window. Therefore, you should see a list of them right away. 

 

If your clients pay the commissions of the vendors, you can make it billable to them. The steps below can guide you through the process. 


First, create a bill for the vendor:

  1. Go to Vendors at the top menu bar, select Enter Bills.
  2. Enter other necessary details. 
  3. Add the commission expense under the Expenses column.
  4. Select a customer in the Customer: Job drop-down. 
  5. Click Save and Close

Second, invoice the customer for the commission:

  1. Go to Customers at the top menu bar, select Create Invoices.
  2. Enter the name in the Customer: Job field. 
  3. Choose the Select the outstanding billable time in the Billable Time/Costs box.
  4. Click Ok.

Once you receive the payment from the customer, record it in the Receive Payments screen:

  1. Go to Customers at the top menu bar, select Receive Payments.
  2. Enter other necessary details.
  3. Click Save and Close

Lastly, to pay the vendor for the commission:

  1. Go to Vendors, then Pay Bills
  2. Choose the Bill you've created.
  3. At the bottom part, select Check as the Method
  4. Click Pay Selected Bills

Check out these articles for more details:

These resources should guide you through the process. If you have questions, or for anything else, feel free to leave me a response below. I'll be around!

Established Community Backer ***

Re: "In the past I would enter sales commissions in the check...

"I can't enter an invoice or a sales receipt for an entity on my vendor list. Invoices and Sales receipts only apply to Customers, correct?"

 

Anyone who pays you is your Customer. A Vendor can be both a vendor name and a customer name for the financial activities between the two of you, and you must Honor and use the right name for each function, as if that is two different entities.

 

You pay and report vendors for goods and services, for 1099-Misc. Not the Customer Name.

 

Customers pay you for sales of goods and services, and the commission income is paid to you by a customer name. Not the Vendor Name. Yes, you would use invoice or sales receipts.

Established Member

Re: "In the past I would enter sales commissions in the check...

Thanks! I knew this at one time, but had forgotten, lol. That's my solution!

Senior Explorer ***

Re: "In the past I would enter sales commissions in the check...

As the Brooker, I receive and deposit funds (Premiums) from a Group into a Trust Account. How do I transfer the money (premiums)over to the Insurance Company and receive my commission income, from the company, my commission is a % of the total premiums. HELP PLEASE.
Established Community Backer ***

Re: "In the past I would enter sales commissions in the check...

@wp318

 

You asked your Own topic, and in fact, Multiple times. I recommend you go here:

https://quickbooks.intuit.com/community/About-QB-Community/Setting-up-a-company-file-for-an-insuranc...