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Community Contributor *

customer prepayment

a customer wants to prepay online but there is no outstanding invoice. what is the best way to allow him to prepay?

7 Comments
Established Community Backer ***

Re: customer prepayment

Have him send you money through PayPal 

Community Contributor *

Re: customer prepayment

it's a customer of a QBO client.  My question was if the customer wants to pay online, like he regularly pays his invoices ( but he wants to prepay for future invoices), besides setting up a fake invoice in QBO and then deleting it, or I guess postdating the invoice, is there another option?

QuickBooks Team

Re: customer prepayment

Hello again, MaryBethP.


I appreciate you providing the details on how your client wants to pay invoices. I’m here to ensure you’ll be able to track the customer’s prepayment, so you can efficiently manage your business.

 

At this time the option to automatically process a prepayment in QuickBooks Online is currently not available. Alternatively, you'll need to manually enter the payment.

 

To begin, create an account for posting the deposit you receive from your customer. Let me walk you through the steps.

 

Here's how:

  1. Go to Accounting on the left panel, and select Chart of Accounts.
  2. Choose New at the top.
  3. In the Account Type drop-down, select Other Current Liabilities.
  4. In the Detail Type drop-down, choose the type of account you want to create.
  5. Enter Customer deposit in the Name field.
  6. Fill in the field boxes.
  7. Click on Save and Close.

Next, create the item you’ll use to invoice customers for the deposits. To add a Service item, please follow these steps:

  1. Go to the Gear icon at the top, and choose Products and Services.
  2. In the Products and Services window, select New.
  3. Then choose Service.
  4. In the Name field, enter Customer Deposit.
  5. Fill in the field boxes.
  6. Click on Save and Close.

After performing these steps, you can start with invoicing the customer for the initial payment. Just a heads up, the amount of the invoice is not income.


It will show as a liability on the balance sheet since the transaction is not yet complete to earn the revenue. By the time you’ll be creating the actual invoice, make sure to enter the Customer Deposit.

 

This allows the deposit to be shown deducted from the final invoice total where the customer can see they are receiving that credit.

 

By following the resolution steps, your customer's prepayment is already recorded without setting up a fake invoice.

 

I also recommend you share your thoughts directly to our Product Development Team to add this feature for future updates. Just click on the Gear icon and choose Feedback.

 

Don't hesitate to leave a comment below if you have additional questions about working in QBO. I'll be glad to lend a helping hand. Wishing you continued success.

Experienced Member

Re: customer prepayment

Once the deposit has been manually entered and it is in the liability account Customer Deposits, how do you then apply the funds in Customer Deposits to an Invoice?

QuickBooks Team

Re: customer prepayment

Hello there, JimPost.

 

Thanks for getting back. I want this to be taken care of and help you handle customer prepayment in QuickBooks Online (QBO).

 

I have one quick way to directly post the deposit as a credit to the customer. You'll just need to change the Other Current Liabilities to Accounts Receivable.

 

When you create a Bank Deposit, you use the Accounts Receivable with the name of customer and then you can apply this to the invoice through Receive Payment.

 

That should keep you on the right track. Let me know if you have follow-up questions about customer prepayments and I'd be glad to clear things up for you.

Experienced Member

Re: customer prepayment

Thank you Chaires_M.

 

Unfortunately, what I need is the step following what

QuickBooks Team

Re: customer prepayment

Hello there, @JimPost

 

I appreciate you sharing the steps that you need about your prepayments.

 

Yes, you're correct that the prepayment is treated as a liability to offset the deposit asset into your bank account. When you invoice the customer and receive payment against it, you'll turn that liability into income.

 

I'd be delighted to guide you through how to utilize the prepayment and pay it by creating an invoice.

 

First, let's make an invoice for the deposit from your customer. Here's how: 

 

  1. Go to the Plus icon (+) at the upper right. 
  2. Under Customers, select Invoice.
  3. Choose the Customer name from the drop-down list.
  4. In the Product/Service column, select the Retainer or Deposit item you've set up.
  5. In the Rate or Amount column, enter the amount received for the retainer or deposit.
  6. Click Save.

 

Then, you'll need to turn retainers into credit on an invoice and receive it like a payment. Here's how: 

 

  1. Create an invoice that lists the services or goods you provided for your customer.
  2. In the Product/Service field, select the Retainer or Deposit item.
  3. Enter the retainer amount as a negative to subtract it from the invoice.
  4. Click Save

Please see the screenshot below to show you the last three steps. 

 

 

By doing so, it will decrease the amount in your liability account and applies the credit to your customer's invoice. This will turn into income.

 

For more details about prepayments in QuickBooks Online (QBO), here's a great article you can check out:  How to Record A Retainer or Deposit

 

Please let me know how it goes on your end, @JimPost. I'll be here If you have follow-up concerns about this or should you need anything else. Cheers!