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Level 2

Estimate or Invoice - utterly confused about receiving payments

Hello, need some help as I feel I am making a mess of our Quickbooks Online records.

 

My wife runs a wedding design business. It is common for her to prepare an estimate for a client in Year 1 for services to be provided a few months later or in a separate fiscal year altogether, e.g. Year 2. In the meantime, the client sends a payment for an initial payment of 25% of the total price and makes subsequent payments right up to the wedding event date.

 

First, we started by issuing invoices and receiving payments against the invoice. However, at tax time, it caused confusion because the invoice date triggered revenue for the event to be recognized (even though the event doesn't take place until the next year...and not all the payment amounts have been received).

 

My bookkeeper advised we only issue Estimates, receive payments as Credits for the customer, and issue the invoice closer to the event date applying all the received payments. We are doing this now but have a few issues- 1) Estimates don't show payments to date and balance due so we have to separately email clients what they have paid/owe; 2) No live link to the Estimate so we can't see how often the Client has viewed it. And 3) I feel I'm just doing it wrong and there has to be an easier way.

 

I believe we are recognizing revenue on an accrual basis which is why we are using invoices to determine revenue recognition. Would it be easier to simply change the "invoice date" after an invoice is created to the future wedding event date and simply receive payments as they come due and apply to the invoice? If this solves the revenue recognition issue, we can revert back to what we originally did that kept things simple and provided audit history details, balance due information, etc.

 

Thank you.

Solved
Best answer April 21, 2020

Best Answers
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Moderator

Estimate or Invoice - utterly confused about receiving payments

Thanks for the details, zs2.

 

The suggestion you've shared, which is to issue an invoice dated August 2021, also works. However, I'd recommend reaching out to your Accountant. They're the best support that can guide on what's the best way to record the invoice.

 

I've also added these articles for more information when recording an invoice:

 

 

Feel free to get back to me if there's anything that I can help!

View solution in original post

4 Comments 4
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Community Champion

Estimate or Invoice - utterly confused about receiving payments

Estimates are non-posting and nothing wrong with starting with an Estimate, but since your service is over time you should, instead of creating a full invoice from an estimate, use Progress Invoicing, creating invoices at certain times to match the payments and thus spread the income out based on multiple progress invoices.

Here is a little help.

 

https://quickbooks.intuit.com/learn-support/en-us/manage-invoices/set-up-and-send-progress-invoices-...

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Level 2

Estimate or Invoice - utterly confused about receiving payments

I prefer to issue one complete invoice which includes a series of wedding related services sold as a "bundle". Progress invoicing won't work as there isn't a specific deliverable prior to the event date.

 

So for example, customer books an event in April 2020 for an event in August 2021 for $10K total. We will collect $2500 in April 2020, $5K in Jan 2021 and $2500 in July 2021. Because we issued the invoice in April 2020 for payment to be applied, the full $10K is being considered as revenue in 2020 vs. Aug 2021.

 

Is it possible to simply issue the invoice in Apr 2020 with an "Invoice Date" of Aug 2021 and keep applying payments to this invoice as these are collected? I tested with a sample invoice and future dated invoices are allowed.

 

Would this approach work in our situation? If not, looking for suggestions that keep things as simple as possible while balancing the need to clearly lay out for the client what they have purchased and total $ amount (as listed in the invoice), what they have paid to date (receive payments applied to the invoice balance), $ amount owing and finally ensuring the invoice revenue is reflected accurately in the correct business fiscal year.

 

Thank you.

 

 

Highlighted
Moderator

Estimate or Invoice - utterly confused about receiving payments

Thanks for the details, zs2.

 

The suggestion you've shared, which is to issue an invoice dated August 2021, also works. However, I'd recommend reaching out to your Accountant. They're the best support that can guide on what's the best way to record the invoice.

 

I've also added these articles for more information when recording an invoice:

 

 

Feel free to get back to me if there's anything that I can help!

View solution in original post

Highlighted
Level 3

Estimate or Invoice - utterly confused about receiving payments

Billing for a project that stretches over days, weeks, months, or sometimes even years is painful when you have to recreate successive invoices and reference old invoices or payments to determine what to bill next. 

If you’re a QBO customer, you can now choose how much of an estimate you’d like to convert into an invoice (either by percentage or amount), keep track of how much you’ve invoiced, and continue converting from the original estimate until it’s been fully invoiced. This is called Progress invoicing can be kicked off from an estimate, when creating an invoice, or from the transaction list in the Customer tab.

Remember, you can choose how much of an estimate you want to convert to an invoice, including:

  • The total of all lines on the estimate
  • A percentage for each line, or
  • A custom amount for each line

You can keep your books on accrual accounting. I suggest to keep it simply generate invoice by amount not percentage. Progressive invoicing is what you should be doing for your business invoicing to keep it simple.

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