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Level 2

How do I properly record customer deposits/down payments? What item type to use?

We are a small contracting company that creates estimates for customers using QuickBooks.  On the estimates, we list a payment schedule of 30% before the start of the job, 30% halfway through, and 40% upon completion.

 

How do I handle those two 30% advance payments?  From what I understand, I first need an 'Other Current Liability' account.  So I created one called 'Customer Deposits'.

Next, I read I need to create an item tied to that account.  But what item type should I use?? Service, Other Charge, or Payment? (see attached image).  My mind tells me it should be 'payment', but I'm not sure.

 

From there I know I then need to make a sales receipt with the deposit item and the amount equal to the deposit. 

 

Do I do this same procedure for additional pre-invoice deposits? In the past we have also had some customers who had different payment schedules, such as 20%, 20%, 20%, 20%, 20%.  So four separate 20% payments during the job and an invoice for the remaining 20% after completion.

 

Thank you!

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Best answer 01-03-2018

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Level 15

How do I properly record customer deposits/down payments? What item type to use?

@K-milk

 

Service type item for the customer deposit. Assuming the deposit is refundable, if it is not refunable then it is income and you do not use the deposit liability account

the remaining payments in your schedule are not deposits, they are "progress" payments.  Unfortunately QBO does not do progress invoicing, so the only work around you can do is to create an estimate for each payment and when the time comes around you copy the estimate to an invoice.

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2 Comments
Highlighted
Level 15

How do I properly record customer deposits/down payments? What item type to use?

@K-milk

 

Service type item for the customer deposit. Assuming the deposit is refundable, if it is not refunable then it is income and you do not use the deposit liability account

the remaining payments in your schedule are not deposits, they are "progress" payments.  Unfortunately QBO does not do progress invoicing, so the only work around you can do is to create an estimate for each payment and when the time comes around you copy the estimate to an invoice.

View solution in original post

Highlighted
Level 2

How do I properly record customer deposits/down payments? What item type to use?

Rustler, thanks for your reply.

We are using QuickBooks Desktop. How would I go about doing that? I'm unsure if progress invoicing would be right for us. Our customers want to see a final invoice at the end of the job with all the work that was completed. So, If we have an estimate with a quantity of 100 for a line item, the final invoice should also show 100. Progress invoicing splits the quantity between the invoices, so instead I'd end up with two (or more) invoices, one with a quantity of 60, and the final with 40.

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