Welcome to the Fit Small Business QuickBooks Online training course. In the how to create and send invoices tutorial, we showed you how to create customer invoices. In this tutorial, we show you how to properly record customer payments so that your accounts receivable balances are always up-to-date.
You can watch the video below and follow along with your own QuickBooks Online account. Don’t have one? Sign up for a free 30-day trial. Let’s begin!
If you’d like to learn more about managing income, expenses, and reporting in QuickBooks download our free 39 course QuickBooks tutorial below.
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What Does Receiving (Recording) Payments Mean?
If you sell products or services on credit, you will need to create an invoice in QuickBooks to record the sale. When you receive payment from your customer, it needs to be correctly applied to the open invoice in QuickBooks. Receiving payments in QuickBooks Online helps maintain an accurate accounts receivable balance.
When a payment is recorded in QuickBooks, the accounts and financial statements that are affected are:
| Account Affected | ||
|---|---|---|
| Accounts Receivable | ||
| Cash |
TIP: You may be wondering why there is no impact on Income when a payment is received into QuickBooks. If you recall, in our tutorial on How to Create and Send Invoices, we mentioned that one of the accounts affected when you create an invoice is Income. Since Income was recorded at the time the invoice was created, there is no change to Income when payment is received.
TIP: If you receive a payment from a customer and you have not created an invoice in QuickBooks then proceed to the sales receipt tutorial to enter this payment ― there is no need to create an invoice.
Why Receiving Payments in QuickBooks Online Is Important
It’s important to record payments in QuickBooks in order to mark open invoices as paid. This will ensure your accounts receivable balance is always up-to-date. If you don’t apply payments to open invoices, your accounts receivable balance will be incorrect and you run the risk of recording income twice if you inaccurately enter the payment as a deposit.
Common issues that may arise when payments are not properly recorded in QuickBooks are:
- Paid invoices remain open: If payments are not applied to the right invoice, the invoice shows as outstanding even though the customer has paid it. This will lead to inaccurate A/R aging reports and could affect your relationship with customers if you ask them for payment on an invoice they have already paid.
- Overstated accounts receivable balances: The amount owed to customers will be inaccurate if payments are not correctly applied.
- Overstated sales (income): If the payment is recorded as a deposit or on a sales receipt, income will be overstated because income was recorded when the original invoice was created.
- Inaccurate financial statements: Overstated accounts receivable and income amounts will lead to inaccurate and unreliable financial statements.
Ways to minimize common issues that may arise when payments are not properly recorded are:
- Search for open invoices: When payment is received from a customer, check to see if the customer has any open invoices. If so, then follow the steps outlined in the how to receive payments in QuickBooks online section below.
- Record a sales receipt: If the customer does not have any open invoices, then follow the steps in the sales receipt tutorial to record this payment.
When depositing payments for your business, it’s important to use a separate business checking account so you don’t commingle funds. To prevent this from happening, open a small business checking account. We compared a range of small business banking options and Chase came out on top. Plus, first-time account holders are eligible for a $300 bonus.
How to Receive a Payment in QuickBooks Online
Receiving a payment in QuickBooks can be summarized in four steps: navigate to the QuickBooks Online receive payment window, select the customer and invoice the payment is for, enter the payment details, and confirm the payment was applied correctly.
The four steps to receive a payment in QuickBooks Online are:
1. Navigate to the QuickBooks Online Receive Payment Screen
From the homepage below the Customers column, select Receive Payment as indicated below:
Navigate to Receive Payments in QuickBooks Online
2. Enter the Customer Payment Details
Once on the QuickBooks Online Receive Payment screen, the following window should display on your screen:
Navigate to Enter Customer Payments in QuickBooks Online
The fields you’ll need to complete as you enter the customer payment details are:
- Customer Name: Select the customer’s name from the drop down.
TIP: If you have not set up the customer info yet, this customer does not have any outstanding invoices in QuickBooks. Do not proceed with receiving this payment. Close out of this window immediately and follow the steps in the sales receipt tutorial instead. - Payment Date: This should be the date that you received the payment.
TIP #1: This date does not impact financial statements, so if you don’t know the exact date that you received the payment, it is OK to make your best guess here.
TIP #2: Keep the envelope that the checks come in so that you can use the postmark date as your payment date.
- Customer Name: Select the customer’s name from the drop down.
- Payment method: Select the payment method from the drop-down list. The options are check, cash, or credit card. If you have an Intuit payments account, select credit card for the payment method, and enter your customer’s credit card information. Once you click the save button, QuickBooks will process the credit card payment.
- Reference no.: Enter the check number in this field if the payment method was a check. If not, you can enter any info here that will help you reference the payment later on.
- Deposit to: Select the bank account that you will deposit this payment to from the drop down.
- Amount received: This field will auto-populate once you select the invoice that this payment applies to in the Outstanding Transactions list.
- Check mark: Put a check mark in this column next to the invoices that the payment is for.
3. Save Customer Payment Details
To save the customer payment details, click the arrow to the right of the save and new button and select save and close as indicated below:
Navigate to Save Customer Payments in QuickBooks Online
4. Confirm Payment Was Correctly Applied
To confirm payment was applied to the right customer, select Customers on the left menu bar as indicated below:
Navigate to Confirm Customer Center in QuickBooks Online
Click on the customer’s name, as indicated below:
Navigate to Customer Profile in QuickBooks Online
Locate the invoice number and amount. Once you find it, the Status column should indicate PAID as indicated below:
Locate Customer Invoice Status in QuickBooks Online
QuickBooks will also mark the invoice as PAID. To display the paid invoice, just click on the Paid status and it will display as indicated below:
Verify Invoice Status as Paid in QuickBooks Online
Wrap Up
That wraps up How to Receive Payments in QuickBooks Online. In our next tutorial, we will show you How to Create Sales Receipts, what a sales receipt is, why you should create sales receipts, how to create a sales receipt in QuickBooks Online, and the impact this will have on your financial statements.
To learn more about managing income, expenses and reporting in QuickBooks Online download our free 39 course QuickBooks tutorial.
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