In my interior design firm I receive large retainers/deposits for a project for which we do not know exact costs at the outset. When I enter the deposit/retainer into QB, I create a Credit Memo in since there is as yet no open invoices to apply against the Credit Memo.
Problem 1: The system does not assign the credit memo a number, I have to do that manually.
Later, after work is performed, I create an invoice. There can be one or several invoices applied against the Credit Memo. QB asks me if I want to use the open Credit Memo to pay the invoice. I say yes. That works fine. Later, I can pull up the Credit Memo (payment) and see all the invoices I have applied against the open Credit Memo, until the Credit Memo is depleted and nothing more can be invoiced against it. That works fine.
However, my next issue: Also associated with this Credit Memo, on the other side of the equation, I am paying vendors for the product or service for which I am invoicing the client. Problem 2: There is no way in QB that I have found where I can tie the vendor payment back to the Credit Memo. The vendor is being paid from that Credit Memo. My goal is to see both invoices applied against the credit memo AND payments to Vendors associated with a credit memo. The difference between those two things is my profit. Can this be done?
Let me help record a retainer/deposit into QuickBooks and set a retainer item that'll be selected when creating a sales receipt for retainer payment.
When setting up a deposit/retainer process for your company, this is treated as a liability to show that, although your business is holding the money, it doesn't belong to you until it's used to pay for services.
First, you'll need to create a liability account to track retainers. Here's how:
Next, create a retainer item:
The retainer item can now be selected when creating an invoice or sales receipt for a deposit or retainer payment. Once you have set up the accounts and the retainer or deposit item, you can begin to create Sales Receipts for the deposits or retainers you receive.
Here's how to create the sales receipt for deposit/retainer payment:
In addition to adding the retainer/deposit amount to your bank account, this increases the amount in your liability account to show that the money isn't truly yours yet, and to avoid treating it as income later.
You can now create a credit memo using the retainer item. Let me show my sample below in creating an invoice and applying the credit memo.
You'll have to manually enter a credit memo number if needed. At this time, we don't have the option to automatically assign a credit memo number. Now when paying vendors using the retainer/deposit, you don't need to link this to a credit memo. Once you're done recording your retainer/deposit in QuickBooks, you can directly pay your vendor using your account where the retainer amount was deposited.
The transactions will now show on your P&L report. Just in case you'll need help with the whole process, you can always reach out to our Desktop Support to assist you with the steps using their screen share tool. You can also check out our site if you need some helpful references in the future: Help articles for QuickBooks Desktop.
That should do it. Let me know if you have additional questions about your retainer/deposit. I'm always here to help.
You took a deposit and deposited those funds.
Now you pay a vendor from those funds, he is not being paid from the credit memo.
Make the contract a job under the customer, then use billable expenses to tag the vendor payment with the job name, do not mark it billable. that will associate the cost with the job.
on the job screen you can run a P&L by job report
Using a credit memo for the deposit, what item did you use and is it linked to a liability account? Or did you just deposit the funds and use the customer name as the source of the deposit?
Either way mis-states your accounts receivable on the balance sheet, since intuit holds customer credit in the A/R account, lowering actual A/R on the balance sheet
I prefer to create the deposit item which is linked to a liability account. Then as you create an invoice you use that same item with a qty of negative one and the amount of the deposit to apply.
Hello there, @dddenise.
Allow me to step in and help provide some additional information about tracking the transactions you've made in QuickBooks.
First, I'd like to acknowledge your effort in adding detailed information about your concern. To record the transactions correctly, you'll need to set up a deposit/retainer by following the detailed steps provided by my colleague. It will help you track your profits.
Then, when creating customer's invoice, you can use the job tracking feature so you can track the expenses for a job and compare those expenses to your revenue by pulling up the Job Profitability Detail report.
Also, if you'd like to view the invoices applied to the credit memo and the remaining credit, you can pull up the Customer Balance Detail report by following these steps:
You may also check this article on how to customize reports in QuickBooks Desktop.
Please know that you're always welcome to post again if you have additional questions. Have a good one.
Thanks for getting back to me, dddenise.
To answer your question, you can only create one service item and use it every deposit you made.
Wishing you and your business continued success.