Are the Customer Deposits being used correctly?

Are the Customer Deposits being used correctly?

There are several ways of handling Customer Prepayments in QuickBooks. The default method of simply receiving payment against no invoice is problematic for several reasons. The main reason we do not recommend this is because it tends to clutter and skew Accounts Receivable (Open Invoices report). This is especially true if you require your customer to prepay before you begin a job. Instead we recommend the following steps to manage your Customer Deposits. Contact CleanBooks for assistance in setting this up correctly in your QuickBooks file.
  1. When receiving a customer deposit (or prepayment), receive it using a Sales Receipt and item "Prepayment". This Prepayment item should point to a liability account.
  2. Give your customer an estimate that shows the entire job amount. On the last line of the estimate, enter the same prepayment item as used on the Sales Receipt in step 1, to reduce the Estimate balance. The balance on the estimate should reflect how much the customer owes upon completion of the job. (If the amounts change before the job is completed, this can easily be adjusted when creating the invoice.)
  3. When the job is ready to be invoiced, create the invoice from the estimate. The previous prepayment amount will autofill and the total invoice balance should reflect what the customer owes you.
Other factors:
  • Because you entered a receipt for the prepayment, the prepayment will show as a non-taxable sale for sales tax filing. This can be corrected by doing a monthly adjustment to reverse the balance of prepayments received less prepayments applied. Contact CleanBooks for more information.
  • Use QuickBooks Premier to better manage Change Orders.
  • Reconcile the customer prepayment Liability account, or monitor the prepaid balance per customer using a summary report on this account (hide zero balances)

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