HELP - How do I record a payment made on behalf of a customer?

Hi there, Childcare Company.

Welcome to the Community. Helping you with recording a payment on behalf of the customer in QuickBooks Online is my priority.

When receiving a payment from a collection agency on behalf of the customers, you can set up the collections agency as a customer so you can keep track of the payments.

Here's how:

1. Choose Sales and then Customers at the top.
2. ​Select New customer.
3. Enter the collections agency's information.
4. Select Save.

After that, you'll need to enter a Journal Entry to distribute the payment from the collections agency to the correct customers.

To do that:

1. Select the Plus icon (+) at the top and then Journal Entry.

2. Enter the Date the payment was received.

3. On the first line, select the Account drop down and choose Accounts Receivable.

4. In the Debit field, enter the full amount of the payment.

5. In the Memo field, note the reason for the journal entry.

6. Select the Name drop down and select the collections agency name. 

7. On the second line, select the Account drop down and select Accounts Receivable.

8. In the Credit field, enter the payment amount for the first customer.

9. Select the Name drop-down and choose the name of the customer where the payment is being transferred. 

10. After all the customer payments are distributed, select Save.

This journal entry will create an open balance for the collections agency and list a credit to the customer's account.

Now, you'll have to enter the payment from the collections agency to deposit the funds and clear out the collections agency balance you just added.

Here's how:

1. Choose the Plus icon (+) and then Receive Payment.
2. For Customer, select the collections agency.
3. Enter the collection Payment date and for Amount received, enter the total of all the cleared outstanding balances.
4. Under Outstanding Transactions, make sure the appropriate amount are checked off.
5. If you have to deduct commission from the total amount paid, mark the deposit account as Undeposited Funds.
6. Select Save.

However, if the collections agency deducted a commission, you can record that when you make the deposit, you'll need to follow these steps:

1. Choose the Plus icon (+) at the top and then Bank Deposit.
2. Under Select the payments included in this deposit, select to mark the amount listed for the collections agency.
3. then, add the commission, under Received From, select the collections agency.
4. For Account, select the expense account where you record your collection fees.
5. Under Memo, enter a note such as "Commission fee for collections".
6. Under Amount, enter the amount of the commission fees as a negative ( - ) number.
7. Make sure the Deposit Total matches the actual amount you received from the collections agency.
8. Select Save.

Lastly, apply the credits created by the journal entry to close the customer's outstanding charges.

Here's how:

1. Choose the Plus icon (+) at the top and then Receive Payment.
2. Select the customer with the appropriate outstanding balance.
3. Enter the Payment date you want to show the payment received by, but leave blank the Amount received field.
4. Next to Credits, select the plus + sign and choose the journal entry entered for the collections agency.
5. Under Outstanding balances, select the appropriate open invoices.
6. Select Save.
7. Repeat the process until all the open invoices paid by the collections agency are closed.

That should guide you on your way to successfully record the payment made on behalf of a customer on your QuickBooks.

Please let me know if you have any questions about these steps. I'll make sure to get back to you as soon as I can.  Have a wonderful day.

@Childcare Company

On the parent's books, create a new "Due from Daycares" as a parent account. You can then create subaccounts for each daycare center under the parent account.

To create new accounts: From the Dashboard > Accounting > select Chart of Accounts > Select New >
Account Type = Other Current Assets
Detail Type = Other Current Assets

"However, the radio company requires one big lumpsum payment therefore I paid for this upfront from the corporate account."
Just split payment transactions using these accounts.

"Each daycare will now pay the corporate account back for these ads."
When you receive the payments, use these accounts.

You can View Register balance with transactions. Just go back to the Chart of Accounts to review those accounts.

Hello. I was following your steps to record a payment made on behalf of a customer as I received payment from a collections agency and I ran across an issue that I am hoping you can help me with. I created a new customer using the collection agency info. Then I went to create a journal entry.

In your first step of entering a Journal Entry to distribute the payment from the collections agency to the customer, you state to Debit - Accounts Receivable and select the collection agency from the Name drop down. Then on the second line you say to Credit - Accounts Receivable and select the customer whose invoices were paid by the collection agency in the Name drop down.. Quickbooks will not allow 2 - AR or AP accounts in one Journal Entry. What do you suggest I credit instead? I have tried a couple other of my accounts, but they did not create a credit on the customer side that I need to pay the invoices on. Thank you.

Jen_D,

I wanted to reply quickly with a Thank you for taking the time to help with my issue. I am using QB Premier 2018. As soon as I have some time this week I will walk thru the steps your provided.

Thank you!

Andrea

Thanks for the help!

Question: how would you record this when there wasn't an actual deposit into our account since the customer paid the collection agency, not us? The way they do it is by the month and they account for payments we have received directly and what they have received, then accounting for the commission fees. 

So the commission due to the agency (based on what we have received and what they have received) is higher than the amount of payments they have received, giving us an open bill to pay to them. 

Can you help with this??

Hello BettyJaneB,

Thank for your detailed response. I am having a challenge completing your step by step instructions because my client is a restaurant and they owe a vendor.

The invoices that need to be paid are for a VENDOR my client owes, not a customer. .  When I try to create the appropriate JE, there is no customer to transfer the payment too. Please clarify. 

Thank you

You can create a billable expense instead, Betty2021. Let me guide you.

It's an expense you incur on your customer's behalf when you perform work or buy something for them.

First, you'll have to turn on the feature. Here's how:

1. Click the Gear icon.
2. Select Account and settings.
3. Go to the Expenses tab.
4. Click the Pencil icon in the Bills and expenses section.
5. Turn on Make expenses and items billable.
6. Click Save, then Done.

Next, create a billable expense transaction (Check, Expense, or Bill), and select the customer you want to bill the expense transaction. 

Then, add the billable expense when you create an invoice to reimburse the cost.

You can refer to this article for more information: Enter billable expenses.

If any questions arise, please feel free to get back to this thread. We're just one comment away. 

Aloha,

Maybe I am not expressing my question correctly. I'll use an example:

I own a restaurant. One of my vendors (I buy paper products from them)  sent me to collections for outstanding invoices.  I have to pay the collections company directly.  I need to record the payment to the collections company.  I also need to record the payment towards the outstanding invoices leaving me with a 0 balance due to the Vendor.

I hope this is more clear.

Mahalo!

Hello @Betty2021,

You can create a new liability account and use it to track the payments made to the vendor in question. Let me show you how.

1. Go to Accounting.
2. Select Chart of Accounts.
3. Click New.
4. Under Account Type, select Other Current Liabilities.
5. On the Detail Type menu, select Other Current Liabilities.
6. Enter the name of your new account. Say Collections Company.
7. Click Save and Close.

Then, create a vendor credit with the amount of purchase. To do so:

1. Go to the +New button.
2. Under VENDORS, select Vendor credit.
3. Select the vendor in question.
4. On the CATEGORY column, select the recently created liability account.
5. Enter the amount of purchase.
6. Click Save and close.

Once done, open the existing bill and apply the created vendor credit, making sure the amount to pay is 0.00.

In the same manner, you can write a check to the vendor in question to complete the payment. Here's how:

1. Go to the +New button.
2. Under VENDORS, select Check.
3. Select the vendor in question.
4. On the CATEGORY column, select the recently created liability account.
5. Enter the amount of purchase.
6. Click Save and close.

On top of that, I've also included this reference for a compilation of articles you can use while working with us: Expenses and Vendors for QuickBooks Online.

If you have any other questions, please let me know by leaving any comments below. I'll be here to lend a helping hand.

Hi, I followed your instruction, but i can not find the collection company in the step 2 under "Select the payments included in this deposit." Do you know why this happened?

Thanks.

I got you, SummerWang.

Let me walk you through how to put payments in the Undeposited Funds account so you can combine the collected funds from the agency and the deducted commission (fee or charges). 

QuickBooks has a special way for you to combine transactions. It's possible that you directly deposited the payment into your bank account instead of the Undeposited Funds account. That's why you're unable to see them when you create a bank deposit. 

Let me show you how: 

1. Record the payment from the collections agency through the + New > Recieve payment option or edit and review the existing payment you already created. 
2. Select the customer or agency's name.
3. Enter the payment details and under the Deposit to drop-down, select Undeposited Funds.
4. Select the invoice to pay and then Save and close.
5. Go to the + New button and select Bank deposit.
6. From the Account dropdown, choose the account you want to put the money into.
7. You'll see the payments you just recorded.
8. To add fees or the commission, scroll down to the Add funds to this deposit section.
9. Enter the fee as a line item and select the expense account you use in tracking fees. 
10. Enter the amount fee as a negative number. If the fee was $.50, enter –.50.
11. Review the deposit total with the bank fee. Then, Save and close.

You can check out these links that will give you overviews on how to create a bank deposit and keep track of them:

• Record and make bank deposits in QuickBooks Online
• Run a report

I'm only a post away if you have other questions or concerns about recording payments in QuickBooks Online. It's always my pleasure to help you out again.

Problem Solved, thank you so much.

How do I record a customers payment they made to us that was already sent  to collections?

I can help you record this payment, @SCE0721.

Before we start, may I know how you enter the collections in QuickBooks Online? Is this set up as a category/account in your Chart of accounts? Please help me share some details to ensure we record this customer payment accurately.

I'd be happy to assist you more in this Community forum. I'm always here to help. Stay safe and well!

The customer sent me the check instead of sending it to the collection agency.  I don't know how to record that in QuickBooks.  I set up an other asset account called collections and set up the collections company as a customer. 

After following these steps, how do you match the deposit you recorded with the transaction that shows up in the banking feed when the payment was included in a bulk deposit?

I tried splitting the transaction, but when you attach it to the customer or open invoice it changes the amount open on the invoice and duplicates income.

Hi there, ChrisHedge. I'm here to assist you with properly categorizing bank transactions and avoiding duplicate income in QuickBooks Online.

Beforehand, may I know what steps you followed?

To avoid getting duplicate income, match the deposits in your bank feeds to the recorded ones instead of adding them to your register.

To match it, please ensure that the recorded entry's deposit details match the transaction that showed up in your bank feeds. You're unable to match it by splitting the transaction if they have different information. Here are some reasons why a transaction can't find a match:

• The payees, amounts, or dates don’t match.
• The transaction is older than 6 months. You can still find a match when you select the Find match section.
• The bank account on the payment differs from the bank where the match is located.
• The payment has been reconciled.
• The record is already matched to another transaction.
• Multiple currencies are involved, and the exchange rate has shifted significantly, making the amounts very different.

If they have different details, you can simply Exclude the deposit transactions that showed up in your Bank Feeds since you already recorded them manually in your QBO account. Here's how:

1. Go to Bookkeeping, pick Transactions, then tap Bank transactions.
2. From the For Review tab, select the checkbox for the transactions to exclude.
3. Click Exclude to proceed.

After categorizing the records correctly, you can now start the reconciliation process. Here's an article that will guide you through the steps: Reconcile an account in QuickBooks Online.

We're always here in the Community to help if you have other questions related to bank deposits in QuickBooks. Stay safe!

To record a payment you made on behalf of a customer in QuickBooks Online, where the customer will reimburse you later, follow these steps:

1. Record the Payment to the Supplier

• Go to the "Expense" or "Check" section in QuickBooks.
• Create an Expense or Check:
  • Select the bank account you used to make the payment.
  • In the "Payee" field, choose the supplier.
  • In the "Category" section, select the appropriate expense account (e.g., "Cost of Goods Sold" or "Purchases").
  • Enter the amount you paid.
  • Save the transaction.

2. Create a Billable Expense for the Customer

• Edit the Expense or Check:
  • Find the transaction you just recorded.
  • In the "Item Details" or "Account Details" section, add a new line item:
    • Select the appropriate expense account.
    • Check the "Billable" box.
    • Enter the customer name in the "Customer" field.
  • Save the changes.

3. Invoice the Customer

• Create an Invoice:
  • Go to the "Customers" section and select the customer you paid on behalf of.
  • Create a new invoice.
  • QuickBooks will prompt you to add the billable expense to the invoice.
  • Add the billable expense to the invoice.
  • Review the invoice to ensure everything is correct, then save and send it to the customer.

4. Receive Payment from the Customer

• Once the customer pays you, record the payment against the invoice.

Summary:

• Expense: Record the payment to the supplier as an expense or check.
• Billable: Mark it as billable and assign it to the customer.
• Invoice: Invoice the customer for reimbursement.
• Payment: Record the customer payment when received.

To record a payment you made on behalf of a customer in QuickBooks Online, where the Customer will reimburse you later, follow these steps:

1. Record the Payment to the Supplier

• Go to the "Expense" or "Check" section in QuickBooks.
• Create an Expense or Check:
  • Select the bank account you used to make the payment.
  • In the "Payee" field, choose the Supplier.
  • In the "Category" section, select the appropriate expense account (e.g., "Cost of Goods Sold" or "Purchases").
  • Enter the amount you paid.
  • Save the transaction.

2. Create a Billable Expense for the Customer

• Edit the Expense or Check:
  • Find the transaction you just recorded.
  • In the "Item Details" or "Account Details" section, add a new line item:
    • Select the appropriate expense account.
    • Check the "Billable" box.
    • Enter the customer name in the "Customer" field.
  • Save the changes.

3. Invoice the Customer

• Create an Invoice:
  • Go to the "Customers" section and select the Customer you paid on behalf of.
  • Create a new invoice.
  • QuickBooks will prompt you to add the billable expense to the invoice.
  • Add the billable expense to the invoice.
  • Review the invoice to ensure everything is correct, then save and send it to the Customer.

4. Receive Payment from the Customer

• Once the Customer pays you, record the payment against the invoice.

Summary:

• Expense: Record the payment to the Supplier as an expense or check.
• Billable: Mark it as billable and assign it to the Customer.
• Invoice: Invoice the Customer for reimbursement.
• Payment: Record the customer payment when received.