Pre-payment from client is causing payments to show up as "unapplied cash payments" in report

Thanks for reaching out to the Community about this, peter205.

When you run a profit and loss report using your cash method, you may see unapplied cash payment income. This account's created for proper tax reporting. The first step in resolving these records is running your Open Invoices report.

Here's how:

1. In the left navigation bar, go to Reports.
2. Enter "Open Invoices" in your Find report by name field.
3. Set a report period.
4. Click Run report.
5. Locate the transaction listed as a Payment in your Transaction Type column. If it matches an open invoice, continue with steps six through eight. In the event it doesn't match anything, you'll need to create a transaction for it.
6. Choose a payment date to open.
7. Under Outstanding Transactions, pick an open invoice.
8. Select Save and close.

Once you're finished, you can generate a new profit and loss report and you'll no longer see your unapplied income.
 

I've included a couple resources about using QuickBooks that may come in handy moving forward:

• Reports overview
• Video Tutorials

I'll be here to help if there's any additional questions. Have a wonderful day!

Thanks! I will give this a try. 

Thanks again, ZackE. The issue we are having seems to be slightly different than the one addressed in these steps. As are result, I have decided to contact our accountant regarding the issue. I believe that he will be able to solve it for us. 

When i receive a payment it apply to the oldies invoice and is messing up my invoicing how can i change it to just apply to the invoice that is paid?

It's great to have you join this thread, @Charlie53. I can see how essential it is to correctly link the payments to their corresponding invoices. Let me share some information and steps to avoid messing up your invoicing in QuickBooks Online (QBO).

If you're using QuickBooks Payments to process your invoice payments, please have your customer select the correct invoice for their payment so it will apply accordingly.

To sort this out, we can unlink the payment applied to the incorrect invoice and connect it to the correct one. Simply open the incorrect invoice and click the 1 payment made link. Then, untick the checkmark beside the incorrect invoice and select the right one.

Moreover, if you have recorded a credit memo or delayed credits and you have enabled the Automatically apply credits feature, here's what will happen to your invoicing process:

• If you have older open invoices, QuickBooks applies the credit to the oldest open invoice. If none, QuickBooks applies the credit to the next invoice. 
• If the credit matches the amount on the invoice, the credit memo and invoice will show as Closed. If the credit is less than the amount of the invoice, the credit memo will show as Closed, and the invoice will show as Partial.
• If the credit is more than the amount of the oldest open invoice, QuickBooks applies the remainder to the next oldest open invoice. If there are no more open invoices, the status of the credit memo will show as Unapplied.
• If you create credit and your customer owes nothing, they’ll have a negative balance.

Follow these steps if you want to disable this option so you can select the correct invoices that need to be paid:

1. Go to Settings ⚙, then select Account and settings.
2. Pick Advanced tab. Then, tap Edit ✎ in the Automation section.
3. Turn off Automatically apply credits to decide which open invoices you want to apply the credits/payments.
4. Hit Save, then Done.
   
   

Additionally, you can personalize the appearance of your sales transactions by adding specific information to your invoices and other forms to make them more professional-looking.

I'd love to know updates on how this goes after performing the steps above. I'm always around to help if you have more questions about linking your payments to appropriate invoices in QBO. Have a great day ahead!