How to mark unpaid invoices as paid

LogineticsLLC · ‎January 09, 2023

As newbie consultants we initially did not record QuickBooks invoices for our customer. We did record and appropriately apply payments. At the end of the year we discovered the error of our ways and after the fact created a single invoice to make things balance. How do I mark it as paid without creating a corresponding income amount in Undeposited Funds?

BigRedConsulting · ‎January 10, 2023

RE: I can update those deposits to change the Received From to apply them to the customer, but that doesn't seem to apply them to the open, unpaid invoice.

That's correct. It won't. Based on this description, you didn't receive and apply Payment transactions as previously asserted, but instead recorded deposits. Notably, if you recorded deposits and used income accounts, and then recorded an invoice and also used income accounts, then you've doubled your income.

If you want to record invoices for your sales, then the proper sequence is Invoice -> Payment -> Deposit where only the invoice uses income accounts, and both the payment and the deposit will only use balance sheet accounts. Trying to do it backwards is somewhat difficult, but in this case you can record payments and then add them do your deposits, replacing the detail that is there.

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JessT · ‎January 16, 2023

Thank you for clarifying your situation, LogineticsLLC.

I understand you want to resolve the unpaid invoice without impacting your financials. I have a different option for you. However, consider backing up your company file before making any changes so you can restore it in case any issues arise.

To proceed, delete the credit memo you created since there isn't such a transaction in reality. After that, open the deposits and change the income category to Accounts Receivable (A/R). Be sure to also tag the relevant customer, as this will convert the deposit into credits that can be applied as a payment to their invoice. This adjustment will not affect your reconciliation since we are not changing the amount or the reconciliation status.

Additionally, the income reported from the deposits will be replaced by the income reported from the invoice transaction. Thus, changing the income category of the deposits to Accounts Receivable helps avoid double counting your reported income.

Alternatively, you can follow the previously mentioned steps: delete the deposits, pay the invoices, and then deposit the payments.

Feel free to reach back out if you need more help with your invoice.

View solution in original post

BigRedConsulting · ‎January 09, 2023

You could not have appropriately applied payments if you didn't have invoices to apply them to. Do you mean you appropriately recorded payment transactions?

If so, then edit those transactions and apply them to the big invoice you created, which will pay down the invoice's open balance. You'll need one invoice per customer in order to do this.

LogineticsLLC · ‎January 09, 2023

I have some checking account deposits (DEP) and some other received payments. I can update those deposits to change the Received From to apply them to the customer, but that doesn't seem to apply them to the open, unpaid invoice. In the first case I'm guessing I need to change the Type from DEP to PMT? But I can't see how to do that. But double clicking what was obviously a payment deposit doesn't give me any obvious method to retroactively apply it as a payment to a specific invoice.

BigRedConsulting · ‎January 10, 2023

RE: I can update those deposits to change the Received From to apply them to the customer, but that doesn't seem to apply them to the open, unpaid invoice.

That's correct. It won't. Based on this description, you didn't receive and apply Payment transactions as previously asserted, but instead recorded deposits. Notably, if you recorded deposits and used income accounts, and then recorded an invoice and also used income accounts, then you've doubled your income.

If you want to record invoices for your sales, then the proper sequence is Invoice -> Payment -> Deposit where only the invoice uses income accounts, and both the payment and the deposit will only use balance sheet accounts. Trying to do it backwards is somewhat difficult, but in this case you can record payments and then add them do your deposits, replacing the detail that is there.

LogineticsLLC · ‎January 16, 2023

What I really wanted was the one unpaid invoice to go away without impacting any of the financials. The deposits had been properly recorded (once) as income, but I had discovered at tax time that I needed to create an invoice to create a proper billed-hours statement for this initial 2-month period. Since everything else was already balanced, rather than try to create a bunch of duplicate payments against this one invoice to replace the deposits I had recorded, I issued a credit memo against the invoice instead.

JessT · ‎January 16, 2023

Thank you for clarifying your situation, LogineticsLLC.

I understand you want to resolve the unpaid invoice without impacting your financials. I have a different option for you. However, consider backing up your company file before making any changes so you can restore it in case any issues arise.

To proceed, delete the credit memo you created since there isn't such a transaction in reality. After that, open the deposits and change the income category to Accounts Receivable (A/R). Be sure to also tag the relevant customer, as this will convert the deposit into credits that can be applied as a payment to their invoice. This adjustment will not affect your reconciliation since we are not changing the amount or the reconciliation status.

Additionally, the income reported from the deposits will be replaced by the income reported from the invoice transaction. Thus, changing the income category of the deposits to Accounts Receivable helps avoid double counting your reported income.

Alternatively, you can follow the previously mentioned steps: delete the deposits, pay the invoices, and then deposit the payments.

Feel free to reach back out if you need more help with your invoice.

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How to mark unpaid invoices as paid