How To Correctly Apply A Payment In QuickBooks [Basic Training]

By qSdCcPjb

An important function in Quickbooks, and one that is often done incorrectly, is applying customer payments and creating bank deposits. You are trying to accomplish two things when you receive a payment from your customer. One is to apply the payment to the customer’s open invoices so their accounts receivable is correct, and the other is to show the money being deposited into your cash account.

One of the two biggest mistakes that I see when I’m training people is them going directly to the deposit screen in Quickbooks to deposit the payment. When you do this, the customer’s account is not updated, and your revenue is likely double booked. Double revenue means double taxes! Ouch!

The second mistake is not having the deposited funds in Quickbooks match the actual deposit amount the bank shows. This makes for a nightmare trying to reconcile your cash account!

The proper way to do this is to go to Receive Payments in the Customer menu. Selecting the proper customer will bring up a list of open invoices for that customer. Enter the date and full amount of the payment and make sure it is applied to the appropriate invoices. When you save it, it will go in to the Undeposited Funds account and wait to be put on a deposit. The customer’s account has been adjusted, but the cash account is unchanged at this point.

You’re not done, though!

Next go to Make Deposit from the Banking menu. This will prompt a screen to open with a list of all of the Undeposited Funds that have not been put on a deposit yet. Select the payments that will be actually going together into the bank. When you are done, the bank deposit screen should match the amount that you are actually depositing into the bank.

That’s it! Follow these steps and you will save yourself a lot of headaches!

NOTE: If you’d like a printable version of these steps (complete with screenshots) just fill out the request form below.