QuickBooks Online: Best Practices For Receiving Customer Payments
I’ve found that one of the most common mistakes made by people using Quickbooks, and one of their biggest headaches when trying to reconcile is improperly entering customer payments and bank deposits. In this blog I’ll go through steps to do this properly and make reconciliation easy in the future.
First, let’s think about how you would do this process manually. Those of us who did books manually in the past will relate completely:
You receive a check from the customer.
You enter the amount as a payment against the customer’s account, showing the invoice(s) as paid.
You stick the check in your desk drawer
After you have a few checks in the desk drawer, you fill out a deposit slip and take the checks to the bank.
The good news is that the process in Quickbooks works exactly like the manual process above. Let’s look at the steps in detail:
Step #1: You receive a check from the customer.
Nothing to do here in Quickbooks other than smile that you received a payment.
Step #2: You enter the amount as a payment against the customer’s account, showing the invoice(s) as paid.
Click on the + (enter a new transaction) and select Receive Payment
Fill in the Customer, Payment Method, Check # and Date. The most important step here is to select Undeposited Funds as the Deposit To account. Why? Well, think about the manual steps we’re duplicating -- you’re not depositing the check straight into the bank, you’re putting it in the desk drawer (it's undeposited!). I’ll explain more about this later when we do the deposit in Step #4.
Select the invoices to pay and hit Save. Easy!
Step #3: You stick the check in your desk drawer.
Again, nothing to do in Quickbooks here. Just smile as the number of checks in the drawer starts to accumulate!
Step #4: After you have a few checks in the desk drawer, you’ll fill out a deposit slip and take the checks to the bank.
Click on the + (enter a new transaction) and select Bank Deposit
Select the account you are going to deposit to (e.g. Checking), the date you’re making the deposit.
Select the checks you are going to deposit, note the amount for your deposit slip, then hit Save.
Take the checks to the bank.
So, why would you do a Bank Deposit separately, rather than just put the Deposit To account as checking -- again, ease in reconciliation. In the example above, if I were to deposit the three checks into the bank as a single deposit, my bank statement would read a deposit of $1309.98. If I had just entered the checks separately, by Quickbooks would show three entries into checking rather than one. These three would match in total to the deposit, but I’d have to manually do calculations when trying to reconcile. If you start getting to 10, 15, 20 items in a deposit it can (and will!!) make things difficult.
By following these instructions, you can avoid a big reconciliation mess. I hope that you will avoid the costly mistakes that others make -- You’ll avoid a lot of grief and headaches if you follow the above tips to enter your customer payments and deposits into QuickBooks Online.