This content is intended for use by ProAdvisors when instructing their clients in the use of QuickBooks Desktop. This article contains additional content related to "Money-In."
In the last few parts of this series, we have been looking at various features related to "Money-In" or the revenue side of the house, including Customers and the Customer Center, Sales Receipts, Invoices and Statement Charges, as well as estimates and sales orders.
Now we want to look at additional transactions related to Accounts Receivable and Money-In, including Receiving Payments and Making Deposits.
Receiving Payments
While Sales Receipts are a single transaction that records both the sale of goods and services as well as the receipt of payment, the same does not apply for QuickBooks Invoices.
Accounts Receivable transactions in QuickBooks such as Invoices or Statement Charges are a two-step process. You must not only create the A/R transaction, but also post the payment once you receive it. This Receiving Payments process is essential to keeping your Accounts Receivable records accurate.
Posting Customer Payments in QuickBooks
1. You must use the Receive Payments function to record a payment against an Invoice. Select Customer, then choose Receive Payments.
2. Enter the payment information, including Received From (your Customer or Customer/Job), the payment amount, the payment date and the type of payment (cash, check, credit card, etc.). Enter a reference number. In the case of a check, this should be the check number.
3. Select the appropriate Invoice against which the payment should be applied by checking the box at the left-end of the list of open invoices appearing in the middle section of the Customer Payment window.
4. In the case of under payment or over payment, additional steps may be required within the lower section of the Customer Payment window.
By default, QuickBooks will post this payment to the Undeposited Funds account. Once you save the payment, the Undeposited Funds account will increase and the outstanding A/R will decrease.
Under most circumstances, recording a Sales Receipt also will increase the Undeposited Funds account.
Customer Payment
Click on any column header to sort the displayed data by the contents of that column. Click once to sort and a second time to sort in reverse order. This makes finding specific invoices against which to apply the payment easier, especially when many outstanding invoices exist.
More About Undeposited Funds
Many first-time users of QuickBooks are confused by Undeposited Funds. So, for purposes of a simple explanation, think of Undeposited Funds like a drawer that holds your cash and checks until you're ready to take them to the bank and post them into the QuickBooks Bank Register. Now, let's look at the process of using Undeposited funds.
If you're using QuickBooks Invoices to record your sales, be sure to use Receive Payments to apply the payment against the Invoice. Don’t make the mistake of skipping this important step. If you go straight to the Make Deposits screen, the invoice won’t show as being paid, and you'll more than likely record your income twice.
By default, QuickBooks automatically selects “Group with other Undeposited Funds” as the account for posting payments you receive. The Undeposited Funds account acts like a holding account so you can record deposits in your QuickBooks Bank Register that actually match the physical deposits you make at your bank.
If QuickBooks didn’t use the Undeposited Funds account, each payment received would be posted individually into your Check Register – even if you frequently posted several payments on a single deposit slip at the bank. This would make it very difficult to reconcile your bank account at the end of the month.
Now that you're familiar with the use of the Undeposited Funds account, we'll return to the process of receiving payments and making deposits.
Depositing Received Funds
Now that we have received the payments and they have temporarily been posted to Undeposited Funds, we use the Make Deposit window to group the payments received into a single deposit entry into the bank account.
That way, you can compare the total dollar amount for a particular deposit slip or batch to the total dollar amount of the deposit on the bank statement. You can do this rather than use a calculator to add up the individual payments on a given day and compare them to the total deposit per the bank statement.
This will help with reconciling the bank account.
Steps to Make Deposits
1. Select Banking; then choose, Make Deposits
2. If there are items in the Undeposited Funds account, the Payments to Deposit window will pop up when you open the Make Deposits screen
Payments to Deposit
3) Select (using a check mark in the left most column) the payments you want to deposit from the Payments to Deposit window. By taking this step, you're clearing those payments from Undeposited funds and posting them to your Bank Deposit. This keeps everything in balance and the accounting straight.
If the Payments to Deposit window does not appear, it means there are no payments requiring deposit. But just to make sure, you may want to click the green Payments icon at the top of the Make Deposit window.
4. After selecting the payments you want included in your deposit, click the OK button at the bottom of the Payments to Deposit window. QuickBooks moves the payment information to the actual Make Deposit window (shown below).
Deposit
5. If you're using pre-printed deposit tickets, you can print a deposit ticket. If you're not printing the ticket from QuickBooks, you can print a Deposit Summary. If cash back is received from the deposit, you can record that in the Deposit window, too.
The most common mistake new QuickBooks users tend to make with this process is they don’t understand they must take action to deposit any received payments into the bank account. Because they don’t see the payment in the register or on reports after they receive it, they often make a duplicate deposit entry into the bank account register and duplicate the income.
Non-Sales-Related Deposits
If you were to receive a non-sales-related payment you need to deposit, like an insurance over payment or reimbursement, for example, simply click on the last blank line and enter details of the check to add it to the deposit total.
An example of such a payment appears on the last line of the deposit illustrated above.
Of course, you also have the option of making a completely separate deposit for such non-sales related deposits.
In our next training article, we'll see how QuickBooks can help you get a clear picture of your sales and receivables by looking at Income Tracker, the Collections Center and both Income and Sales Reports.