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- Understanding what is happening on the financial statements will go a long way to helping understand how to record a customer deposit in QuickBooks.
There are always several ways to do these things so you have to consider what works best for your specific business model
- (eg 1) I don’t care what the financial statements look like, I just want quick easy tracking
- (eg 2) The financial statements are important because they are looked at by banks and other outside investors
- The implication of (eg 2) is that you have to do some follow up to be sure and give customers credit for their payment.
When it comes to posting customer deposits in QuickBooks or any transaction for that matter I can almost guarantee you that there are several ways to accomplish the task. So which is the right way? The answer is likely all of them. It is not as much a question of the right way as it is a question of the best way and that can differ depending on the business. So I like to think about it in terms of what will it look like after I post it. Will it look pretty? Will my balance sheet look like a model for balance sheets? This is why I always stress that it is really important to know the impact of your transactions on the financial statements before you post them in QuickBooks or any software. Go on LinkedIN and ask how to post a customer deposit in one of the QuickBooks groups and you will get 10 different answers and maybe even some people arguing over which way is RIGHT! My question is who will be looking at your financial statements and for what purpose. If it is only you and you never plan on going outside of your company then my Quick and Dirty option may work for you. This option will also save you some hassle in terms of tracking because it puts the payment right on the customer’s account so that when you do eventually invoice them, their deposit is right there waiting to be applied to the invoice. The downside of this is that it sits as a “negative” in your receivables which doesn’t look pretty and to an outside looking at your financial statements it can at the least raise questions and in the worst case it can diminish the potential creditor or investor’s confidence in your ability to present clean, accurate, and reliable financial information.
So my recommendation is to go the “Clean” route and show the deposit properly as a liability on the balance sheet. Now you could record a deposit in QuickBooks and post it directly to a liability account called “Customer Deposits” and you can even put the customer’s name in the “Received From” drop down so you can track it by customer. But I like to think in terms of what will really be helpful to the customer? Wouldn’t it be great to be able to send them an invoice for the deposit?
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