I accepted a payment today from a customer and want to apply part of it to an existing invoice. How do I reclassify the payment so that it applies to the invoice?

Thanks for reaching out to us, joshua-playtga-c.

I'm here to help you categorize your invoice payments. We can use the Receive payment option to apply the funds to your customer's open invoices. This way, they won't stay unpaid on your reports.

Here's how to do it:

1. Click the + New button, then select Receive Payment.
2. Select the name of the customer from the Customer drop-down menu.
3. Enter the appropriate payment method.
4. Under Amount Received, enter the amount of the payment.
5. From the Outstanding Transactions section, select the invoice you want to apply the payment to.
6. You can either deposit the money to your current account or to the Undeposited Funds account.
7. Click Save and close to complete the process.

In case you'll need to track all the invoices that are due on a particular day, we can customize the Transaction Detail By Account report.

With QuickBooks Online, we can also personalize your sales forms so your customers will recognize your brand.

If I can be of any additional assistance, please don't hesitate to insert a comment below. Have a pleasant day ahead.

The problem is that I already created an invoice and had the person pay it. When I set up the invoice, the portion of the payment that would have applied to their existing balance was just coded as a normal expense. How do I re-categorize the payment so that it applies to their balance instead of adding to what they owe?

Thank you for providing details of your concern, @joshua-playtga-c.

Let's review the payment received to know if this is greater than the invoice, to do so, open the customer's invoice by going to the Sales menu. The balance will be a credit to the customer that can be applied for future invoices. If the amount of the payment is the same as the invoice, the customer won't have any credits. 

However, if the customer paid you through Merchant services, the payment of that specific invoice will be designated only on that invoice. If the payment is manually received, you'll need to edit the invoice and reallocate the part of the payment to the different transactions. Make sure that the total amount is equal to the amount paid by the customer.

Here's how to edit:

1. Go to the + New option, then select Receive Payment.
2. Pick the name of the customer from the Customer drop-down arrow.
3. Under Amount Received, enter the amount of the payment.
4. From the Outstanding Transactions section, tick the box beside the transactions you want to apply the payment to.
5. Allocate the amount received from the customer under the Payment column and make sure it matches the amount paid by the customer.
6. Hit Save and close when done.

Also, you can visit our Reconcile hub to assist you in balancing your QuickBooks to match with your real-life bank, this also includes correcting a balance and finance charges in QuickBooks.

If you have other concerns with creating an invoice, let me know by adding a comment below. I'll be right here to help whenever you need one. Have a good one.

I have a similar issue. I added a service in Products and Services and selected the default Income account called Sales. Then I created an Invoice with that service. The invoice was paid online by credit card. After matching the payment that came in through the bank feed with that invoice, I further customized my Chart o Accounts. Since I don't have Sales of Products, I changed the Sales income account to Services (and the detail type to Service/Fee Income). I also created a subaccount under Services Income for that particular service I had initially added in Products and Services. I went back to Products and Services and changed the Income account from Sales to that particular subaccount under Services Income. I thought that should automatically book the transaction into the right subaccount from the Services parent account but it didn't.  Then I tried to reclassify the transaction but apparently, I can't reclassify an invoice payment. It says, "One or more of those changes cannot be reclassified. It may be that you tried to change the account on certain transactions which is not allowed." So how do I fix this so the payment is not sitting in the Services parent account but booked into the subaccount I created just for that particular service.

Hi FF82!

You're almost there. You can update the Income account of the service as well as the transactions. Let me show you.

When you change the income account of the service or product, you'll see this option (see screenshot below). You'll need to put a checkmark in the box provided so that the previous transactions linked to the service or product will be updated, too.

Once done, review the subaccount and it should reflect the transaction.

I also added this link: Customize reports in QuickBooks Online. You'll need this to get accurate data when running reports.

Comment below if you have other concerns with your service items. I'll assist you!

Thank you for your quick reply. When I go to Products and Services, updating the Income account in historical transactions is not an option. I only have an update option under the price, "Update price in recurring templates, too."

Thank you for the update, @FF82. I'm here to share further details about this.

The Also update this account in historical transactions option is available when you're updating the Income account of either a non-inventory or service type of product and services. The Update price in recurring templates, too option will only affect your recurring transactions and won't include historical ones.

You may be changing the income account of an inventory item that's why the Also update this account in historical transactions option isn't available. Inventory items track quantities on hand using First In, First Out (FIFO) method and only affect future transactions. To update the historical transactions for inventory items, you'll have to edit each of them and toggle the item manually. 

To learn more as to how you can change the income account for any of your product or service items, you can check out this article: Change the account for a product/service item.

Also, you can use reports to get helpful insights on the things you buy and sell and the status of your inventory. To know which one to run depending on the data you need, you can refer to this article: Use reports to see your sales and inventory status.

Please keep me posted on how it goes in the comments below. Let me know if you have other concerns about managing the income account of your product and services list in QBO. I'll gladly help. Take care, @FF82.