Receive customer prepayments in QuickBooks Desktop Enterprise

Learn how to set up, record, and manage Customer Prepayments (Customer Deposits) in QuickBooks Desktop Enterprise.

Customer Prepayments (also known as Customer Deposits) are payments you get from a customer before you make an invoice and deliver the product or service.

You can manage and use customer prepayments in QuickBooks Enterprise 24.0 or later.

Here's how to:

• Requirements to use Prepayments
• Turn on Prepayments
• Receive Prepayments on a sales order or estimate
• Print a sales order that shows you received a prepayment
• Apply a prepayment credit to an invoice
• Run reports to see open prepayments on sales orders or estimates
• Edit a prepayment
• Refund a Prepayment

To manage prepayments in QuickBooks Enterprise 24.0 or later:

Requirements to use Prepayments

Prepayments:

• Can only be used with sales orders and estimates
• Can be used with Progress and Non-Progress estimates
• Can’t be edited once they’re applied to invoices.
• Can’t be used with multi-currency turned on
  • If you use Prepayments and then turn multi-currency on, Prepayments will be turned off.

When you create prepayments, you:

• Can’t modify the 'Account for Prepayment Transfer’ as it is an internal account that is used only to transfer the money from the Liability account to the A/R account. 
• Can’t select a Sales Tax account and sub-account (Other current Liability).

Turn on ‌prepayments

1. Go to Edit, and then Preferences.
2. Select Payments and then Company Preferences.
3. Go to Prepayments and then select Prepayment Settings.
4. Select Turn On Prepayments.
5. Go to Current Liability account and select a current liability account or select to create a new one.
6. Once you are done, select OK and then select OK again in preferences.

Receive prepayments on a sales order or estimate

Create and save a new sales order or open any existing sales order.

Note: If you don't have sales orders turned on in your company file, you'll have to turn it on first.

1. Create a new existing sales order or estimate or open an existing one.
2. Select Receive Payments.
3. Select Prepayment on Sales Order or Prepayment on Estimate.
   • You can also open Receive Payments from the homepage or the Customer Center. You’ll need to select Prepayment on Sales Order or Prepayment on Estimate then the sales order(s)/estimate(s) to receive the prepayments.
4. Enter the amount and other details for the prepayment and then select Save and Close.
5. You’ll see the amount is entered for PREPAYMENT APPLIED.

Print a sales order or estimate that shows a prepayment received

1. Open the sales order or estimate then select Formatting.
2. Select Customize Data Layout, and then Footer.
3. Select Prepayments and Balance Due.  
   Note: You can select Layout Designer to adjust the position of these fields in the print template.
4. Select OK.
5. Select Print.

Apply a prepayment credit to an Invoice

1. Open the sales order or estimate and select Create Invoice.
2. Select one of the two options:
   • Create invoice for all sales order(s).
   • Create invoice for selected items.
3. Select Save this invoice then Yes to apply prepayment credits.
   Note: you can also select Apply credits on an invoice to apply prepayment credits.
4. Select the prepayment credit and enter or edit the amount of credit to apply to this Invoice. Then select Done.

How QuickBooks applies prepayment credits

QuickBooks creates two general journal entries for each prepayment credit when you apply it to an invoice.

To see these in QuickBooks, go to the Customer Center and find the Customer/Job you applied a Prepayment credit to an invoice.

You’ll see two general journal entries for each prepayment credit.

• The first general journal entry ‌is mapped to a liability account with a positive amount.
• The second general journal entry is mapped to an A/R account with a negative amount.

Note: The Account for Prepayment Transfer in both general journal entries is an inactive account QuickBooks creates. QuickBooks uses it to transfer an amount from a liability account to an A/R account.

Run reports to see open prepayments on sales orders or estimates

There are two reports you can run, to see open prepayments and open prepayment balances. They are the Open Prepayments by Customer and Open Sales Orders by Customer reports. Here’s how you can run and customize them.

Open Prepayments by Customer report

This report shows you all open prepayments you’ve received that you haven’t applied to an invoice.

1. Go to Reports.
2. Select Customers & Receivables.
3. Select Open Prepayments by Customer.

You can customize this report to include prepayments that have been fully applied to invoices.

1. Select Customize Report, then Filters.
2. Select Prepayment Balance, then Either and then OK.

Open Sales Orders by Customer report

1. Go to Reports and then Sales.
2. Select Open Sales Orders by Customer Report.

We've added the Prepayment Open Balance to this report.

You can customize this report to show open estimates and sales orders.

1. Select Customize Report, then Filters.
2. Select TransactionType, then Multiple Transaction Types.
3. Select Estimate and Sales Order then select OK.
4. Select OK again.

The report will update to show both open sales orders and estimates with their open prepayment balances.

Open Estimates by Job report

1. Go to Reports.
2. Select Jobs, Time & Mileage.
3. Then select Estimates by Job report.

We have added one new column, Prepayment Open Balance, to this report. You can customize this report to only show estimates with prepayments applied.

Edit a Prepayment

You can edit a Prepayment if it hasn't been applied to an invoice. Once it's been applied to an invoice, you’ll need to delete the prepayment (this will also delete the two linked general journal entries) and then create a new prepayment.

Refund a Prepayment

Prepayments, like other customer payments, can be refunded.

If the payment hasn’t been deposited to your bank, you can delete the prepayment and the sales entries it’s applied to (sales order, estimate, and invoice). 

If the prepayment has been deposited to your back, you can either create a credit memo and apply it to another invoice, or write a check to the customer.