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Level 4

How can I track customer prepaid services (Lessons)?

A piano school is currently tracking this on a spreadsheet at each location. They want to centralize using QBO. The parent registers online then pre-pays for a package of 5  lessons through paypal. The teacher can notify the bookkeeper that a lesson has been "used" but what is the best way to track this in QBO?  Thanks

Solved
Best answer 01-07-2019

Accepted Solutions
QuickBooks Team

Re: How can I track customer prepaid services (Lessons)?

Hello there, @Mrjan.

 

I'd be glad to help track customer prepaid services in QuickBooks Online (QBO).

If your PayPal is connected to QBO, you may need to track the transactions manually. If not, you may follow the steps provided below.

 

First, you'll need to make sure that you have an appropriate accounts set up on the Chart of Accounts. For this, you'll need an income account and a liability account to track the unearned income.

 

  1. Go to the Gear icon.
  2. Select Chart of Accounts.
  3. Click New.

Income Account

Liability Account (Unearned Revenue)

Next, you'll need to set up the service items that you'll use in the workflow. You'll need to set up three items.

 

  • Service item mapped to the income account
  • Service item mapped to the liability account
  • Bundle item
  1. Go to the Gear icon.
  2. Select Product and Services.
  3. Click New.

Service item is used to record revenue, this item should mapped to the income account created. This item can also be used when the business sells an individual lesson.

Service item mapped to the liability account created, this is used when the customer redeems a prepaid session. Make sure to use the discounted price.

Bundle item is used when selling package to the customer. This will use the item created that is mapped to the liability account. The price of the bundle item is the sum of the prices of the components. Don’t check the box Display bundle components when printing or sending transactions, the customer doesn’t need to see the component parts.

 

After creating the accounts and items, you'll need to record the sale of the package. Create an invoice or sales receipt to sell the package to the customer. Use the Bundle item on the invoice and record the other required details about the transaction. This will credit the Unearned Revenue account.

Next, create a delayed charges for each lessons using both the liability service item and revenue service item. The next amount of the delayed charge will be zero. Keep in mind that Delayed Charges are non-posting transactions and will not be reflected on the general ledger until they are added to an invoice. The prepaid session item should be entered as a negative quantity in order to reduce the liability account. The regular session item should be entered as a positive to record the revenue earned.

 

When the customer redeems a session, create an invoice and add the delayed charge to the invoice from the drawer. This will create a zero net invoice and create the entry to debit the unearned liability account and credit revenue.

 

That would allow you to track customer prepaid services. Feel free to add a comment below if you have any other concerns by adding a comment below, we're always here to help. Have a good day!

View solution in original post

5 Comments
QuickBooks Team

Re: How can I track customer prepaid services (Lessons)?

Hello there, @Mrjan.

 

I'd be glad to help track customer prepaid services in QuickBooks Online (QBO).

If your PayPal is connected to QBO, you may need to track the transactions manually. If not, you may follow the steps provided below.

 

First, you'll need to make sure that you have an appropriate accounts set up on the Chart of Accounts. For this, you'll need an income account and a liability account to track the unearned income.

 

  1. Go to the Gear icon.
  2. Select Chart of Accounts.
  3. Click New.

Income Account

Liability Account (Unearned Revenue)

Next, you'll need to set up the service items that you'll use in the workflow. You'll need to set up three items.

 

  • Service item mapped to the income account
  • Service item mapped to the liability account
  • Bundle item
  1. Go to the Gear icon.
  2. Select Product and Services.
  3. Click New.

Service item is used to record revenue, this item should mapped to the income account created. This item can also be used when the business sells an individual lesson.

Service item mapped to the liability account created, this is used when the customer redeems a prepaid session. Make sure to use the discounted price.

Bundle item is used when selling package to the customer. This will use the item created that is mapped to the liability account. The price of the bundle item is the sum of the prices of the components. Don’t check the box Display bundle components when printing or sending transactions, the customer doesn’t need to see the component parts.

 

After creating the accounts and items, you'll need to record the sale of the package. Create an invoice or sales receipt to sell the package to the customer. Use the Bundle item on the invoice and record the other required details about the transaction. This will credit the Unearned Revenue account.

Next, create a delayed charges for each lessons using both the liability service item and revenue service item. The next amount of the delayed charge will be zero. Keep in mind that Delayed Charges are non-posting transactions and will not be reflected on the general ledger until they are added to an invoice. The prepaid session item should be entered as a negative quantity in order to reduce the liability account. The regular session item should be entered as a positive to record the revenue earned.

 

When the customer redeems a session, create an invoice and add the delayed charge to the invoice from the drawer. This will create a zero net invoice and create the entry to debit the unearned liability account and credit revenue.

 

That would allow you to track customer prepaid services. Feel free to add a comment below if you have any other concerns by adding a comment below, we're always here to help. Have a good day!

View solution in original post

Level 1

Re: How can I track customer prepaid services (Lessons)?

I'm unable to do this. Does it require the "Plus" version of QBO? Is there any way to achieve something similar with a less expensive form of the software?

QuickBooks Team

Re: How can I track customer prepaid services (Lessons)?

You can switch to the QBO Essentials version, pstrength.

 

If you're using the Simple Start version, there's no option to create a Bundle and a Delayed Charge. You can upgrade your QBO to Essentials to be able to achieve the steps given by my colleague above. This version has a lesser price compared to Plus.

 

To upgrade within QBO, you can follow these steps:

  1. Click the Gear icon in the top-right corner of your Dashboard.
  2. Under Your Company, select Account and Settings.
  3. Go to the Billing and subscription tab.
  4. On the QuickBooks section, select Upgrade.
  5. You'll see the options for upgrading along with the features and pricing. Select the Upgrade option on the Essentials version.
  6. Enter your billing details.
  7. Review the upgrade and the new billing rate, and then select Confirm Upgrade.

Please stay in touch if you need anything else. I'll be around if you have any further questions.

Level 1

Re: How can I track customer prepaid services (Lessons)?

Can this also be used if the customer is paying a lump sum of money and not actual lessons or hours?  My customer wants to have a credit on file and use it for various things.

Anonymous
Not applicable

Re: How can I track customer prepaid services (Lessons)?

Hey there, @sschmidt11,

 

It's great to have you as part of the conversation. I can share some insights about recording your customer's payment in QBO.

 

I want to make sure you're accounting these payments correctly. If your customers are paying you in advance for a service, you can use retainers to record them. Here's a great reference you can check for the complete steps on how to record deposits from customers before performing any services: How to record a retainer or deposit

 

However, if you're referring to recording customer credits, here's how you can do that:

 

Enter a credit memo:

 

  1. Click the Plus icon (+).
  2. Select Credit Memo.
  3. Key in the customer name, date, products/service items, quantities and amount.
  4. Tap Save and close.

Apply the credit memo:

 

  1. Click the Plus icon (+).
  2. Select Receive Payment.
  3. Enter the payment details.
  4. Under Credits, pick the Credit Memo.
  5. Verify that the total to pay (if any) is correct after applying the Credit Memo.
  6. Select Save and close.

I'm sure those steps will get you on the right track. Please feel free to post an update below if you encounter any issues along the way or need further assistance with the steps. I'm here to lend you a hand anytime. All the best!

 

 

 

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