Most business transactions occur with customers paying for a product or service after it’s delivered. In some cases, however, customers may wish to send several payments before the product or service is delivered so they aren’t left with a hefty bill at the end. Known as prepayments, this offers a convenient way for customers to pay for large orders over a given period of time rather than all it once.
If you’re new to Quickbooks, you might be wondering how exactly to set up prepayments in your account. The standard method of recording transactions doesn’t allow for prepayments, but there are a few different ‘workaround’ solutions to solve this problem. If your business deals with prepayments on a regular basis, keep reading to learn the correct way to record them in Quickbooks.
Follow These Steps To Handle Prepayments In Quickbooks:
- Click on the Lists button in your Quickbooks account.
- Select Chart of Accounts.
- Create an account for your customer’s prepayments.
- Create a non-taxable service on the newly created prepayment account and link the two together.
- If this is a new customer, go ahead and create a standard account for them. If they already have an account with you, skip this step and proceed to the next step.
- Use an invoice or sales receipt to record any prepayments made by the customer. Note: you should use the item code that was originally created during steps 3-4. Just remember to set the balance at $0 so it doesn’t interfere with their actual total.
- Once the product/service is delivered, send an normal invoice to the customer like you would for any other job. The only difference is that you’ll need to adjust the invoice total based on the total amount of the prepayments. If a customer paid $800 on a $2,000 job, then you’ll need to send an invoice for $1,200.
- The customer should send you a payment for the remaining balance, at which point you should accept it to finish the job.
Quickbooks makes it incredibly easy to handle prepayments. There might not be a specific system in place designed for prepayments, but following the steps previously mentioned allows business owners to handle prepayments with little effort. The most important thing to remember is to adjust the final invoice based on the total amount of the customer’s prepayments.
Did these steps work for you? Let us know in the comments section below!