QuickBooks Online® Basics: Invoicing & Payments (Series 2, Lesson 5)

Last week's lesson introduced some of the common workflows QuickBooks Online (QBO) users follow to track their sales. We then looked at the first of those introduced workflows which was the use of Sales Receipts to track sales within QuickBooks when a business is paid immediately for their products and services. 

In this week's lesson we look at second workflow which encompasses the Accounts Receivable cycle including Invoices and Payments.

Invoices

Invoices are used to record services your business has provided, when the Customer is going to pay after the fact. The amount owed is your Accounts Receivable.

Select +New > Invoice. The Invoice form opens.

Use the drop-down menu to enter the Customer name.

Adjust the Terms, Invoice date, and Due date as needed.

Use the drop-down menu to fill in the Product/Service field. Or, just start typing; your choices will narrow down.

Check the Send Later box at the top of the window if you’d like to send out Invoices as a group.

Select Save and close or Save and send to record the transaction.

E-mailed Invoices are sent with attached PDFs, so that they cannot be altered by the recipient.

If your business is signed up for QuickBooks Payments Merchant Services1, the emailed Invoice has a Review and Pay button allowing Customers to pay immediately by credit card or bank ACH. When they do, QBO marks the Invoice as paid, batches that day’s Payments, and Matches the Banking Feed for you.

Receiving Payments

Customers can pay Invoices in full, make partial payments, or pay several Invoices at one time.

Select + > Receive Payments.  The Receive Payment window opens.

Select the Customer paying you.

Enter the Amount of the payment you received.

Enter the Payment Method. You can store Credit Card numbers, and run cards right from this window if you’re set up for Merchant Services.

If each payment will appear in the bank individually, change the Deposit to box to that Checking account. If several payments get deposited together, credit cards will be batched, or merchant fees needs to get deducted before the amount gets deposited. Leave this field on Undeposited Funds.

The Customer’s outstanding Invoices and their balances appear in the form.

QuickBooks Online automatically enters the payment Amount in the Payment field. Make sure that amount is correct, in case there’s an underpayment, overpayment, or the wrong Invoice is checked.

In the case of an Overpayment, a Customer Credit will be created to apply to a future Invoice.

Select Save and close to record the payment.

PEBCAK! You’ll see all the Customer’s outstanding Invoices on the list. It’s Incredibly Important that a checkmark gets placed next to the actual Invoice being paid off, and the dollar amount gets verified; otherwise, QuickBooks Online will pay off invoices automatically from the oldest to newest.

This will cause a cascading error. It will look like multiple payments have been applied to multiple Invoices, Invoices will appear partially paid, and the amounts will never match up.

Follow-up

Keeping track of A/R is necessary for every company’s cash flow. Keep a close eye on open Invoices in the Invoice center. Any invoices more than 60 days old deserve follow-up!

If your clients are having trouble with their Invoice & Payment workflow, I can help. My QuickBooks Online Fundamentals video course includes a segment on all the Customer invoicing workflows they’ll need for success. (Use code IA10 for 10% off.)

Next week we’ll take Invoicing a step further by exploring Estimates and Progress Invoicing.

Important footnote(s):

1 - QuickBooks Payments Merchant Service fees are competitive or better than Square and PayPal. Not only that, but because you won’t spend extra time like you do when managing Square and PayPal fees, you will actually save money by spending less time with QuickBooks Payments Merchant Services.

If you are a ProAdvisor, you get discounted rates for you and your clients (please visit our free QB Payments for Pros course)!