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square3
Level 1

how to record a lump sum payment from a new client without billing them yet?

Hello everyone,

 

We have a new client who just paid us a lump sum amount without any invoices from us. We haven't started any work yet but he paid us in full already. How do I report that amount in QBO? We're cash based.

Many thanks!

-Sandra

1 Comment
ReyJohn_D
QuickBooks Team

how to record a lump sum payment from a new client without billing them yet?

It's nice to have you here in the Community, @square3.

 

You can set up a deposit or retainer process to record the prepayment from your client or customer in QuickBooks Online (QBO). This will be treated as a liability to indicate that although your business is holding the money, it doesn't belong to you until it's used to pay for your services. When you create an invoice and receive payment against it, the liability will turn into income. 

 

First, let's create a liability account to track the prepayment from your client. Here's how:

  1. Click the Gear icon ⚙️ and then choose Chart of Accounts under the Your Company section.
  2. Pick the New button.
  3. Select Other Current Liabilities in the Account Type field.
  4. In the Detail Type menu, tap Client Trust Accounts - Liabilities.
  5. Create a name for the account.
  6. Choose an option from the When do you want to start tracking your finances from this account in QuickBooks? drop-down list ▼.
  7. Hit Save and close.

Then, let's create a retainer item. I'll guide you how:

  1. Go to the Sales menu, then click the Products and Services tab.
  2. Pick the New button and then choose Service.
  3. Type a name for the service item.
  4. In the Income account ▼ drop-down menu, pick Trust Liability Account.
  5. Hit Save and close.

You may refer to this resource for more details about the steps above: How to record prepayment from customers in QBO?.

 

Once done, you may start with invoicing your client for the initial payment. However, this amount isn't considered as an income yet. It will still show as a liability on your Balance Sheet report since the transaction isn't yet complete to earn the revenue. 

 

Also, by the time you’ll be creating the actual invoice, ensure to enter the Customer Deposit. This allows the deposit to be shown deducted from the final invoice total where the customer can see they're receiving that credit.

 

To add up, you're able to trace how much of a retainer or deposit you have for each client from the Balance Sheet report. Here's how:

  1. Go to the Reports menu and then choose the Balance Sheet report under the Business overview section.
  2. From the Report period field, pick All Dates and then Run report.
  3. Look for your trust liability account in the Liabilities section.
  4. Select the amount shown for the account to open the Transaction Report for that account.
  5. Click Customize, and then tap Rows/Columns.
  6. In the Group by ▼ drop-down menu, choose Customer
  7. Hit Run report once finished.

Just hit the Reply button if you still have questions about managing customer prepayments in QBO. I'll be glad to assist you further. Take care and have a great day.

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