A customer deposit in Quickbooks Online is when a customer puts money towards a product or service but has not received the product or service. A customer deposit serves as both a reminder and a record of a business’s ongoing transactions.
Let us walk you through how to set up, record, and manage customer deposits in QuickBooks Online.
Setting up Customer Deposits in QuickBooks Online
It’s easy to set up customer deposits in QuickBooks. You first need to create an account for the deposits, which is also known as a Liability Account.
To do this, you’ll need to:
- Click on “Transactions”.
- Choose “Chart of Accounts”.
- Click “New”.
- Select “Other Current Liability” as the account type.
- Name the account. (You can choose product/service orders or go by the name of the customer.)
- Click “OK” to finish naming the account.
Once you’ve created the account, you now need to create an “Item” that serves as the item the customer is paying for.
To do this, you must:
- Go to the “Lists” menu.
- Click “Item List”.
- Right-click to get a pop-up menu and choose “New”.
- Pick the purpose of the deposit from the “Type” drop-down menu (you can choose “Service” for a service or “Other Charge” for a product).
- Type out the name of your item in the “Item Name/Number” field.
- Click on the name of the liability account you created from the “Account” drop-down list.
- Click “OK”.
Now this item can be used to record deposits for products or services.
Recording Customer Deposits in QuickBooks Online
You have two options for recording customer deposits: An invoice or a receipt.
To record a customer deposit as an invoice, you’ll need to:
- Go to the “Customers” menu.
- Click “Create Invoices”.
- Choose the correct customer from the drop-down list.
- Add the deposit item in the “Product/Service” column.
- Enter the amount of money for the deposit in the “Rate or Amount” column.
- Click “Save”.
To record a customer deposit as a receipt, you’ll:
- Go to the “Customers” menu.
- Select “Create Sales Receipt”.
- Click the correct customer from the drop-down list.
- Choose the correct bank account from the “Deposit To” drop-down menu.
- Click the correct deposit item in the “Product/Service” column.
- Type in the amount of money deposited.
- Click “Save”.
Managing Customer Deposits in QuickBooks Online
Once deposits are recorded, it’s time to manage them. You can do this by applying, canceling, or refunding them.
To apply deposits, you can do this as a line item on an invoice or as a credit.
To apply a deposit as a line item, you’ll:
- Open the customer invoice.
- Go to the “Details” section.
- Choose the correct deposit item from the drop-down list.
- Enter the amount of money in the “Amount” column.
- Click “Save”.
When the deposit is applied for the full amount, QuickBooks will automatically mark the transaction as paid.
To apply a deposit as credit, you’ll:
- Go to the “Customers” menu.
- Click “Create Credit Memos/Refunds”.
- Choose the right deposit item from the “Item” drop-down list in the “Detail” section.
- Type in the amount of the deposit in the “Amount” column.
- Click “Save”.
- Click “Apply to an invoice” when the “Available Credit” pop-up appears.
- Choose the right account to apply to the credit.
- Click “Done”.
When a customer cancels, there are three ways to handle the cancellation—keep the deposit, issue a partial refund, or conduct a complete refund.
To cancel deposits while keeping the refund, you’ll need to:
- Create a new invoice for the customer.
- Go to the “Details” section.
- Choose the right deposit item from the “Item” drop-down list.
- Type in the amount of the deposit you are keeping as a negative value.
- Make a note about the cancellation in the “Description” field for easier tracking (optional).
- Click “Save”.
Now the deposit is saved as income, and not recorded as refunded.
To refund partial or full deposits, you’ll:
- Go to the “Customers” menu.
- Click “Create Credit Memos/Refunds”.
- Choose the right customer.
- Enter the right deposit item in the “Details” drop-down list.
- Type out the amount of money being refunded in the “Amount” field.
- Click “Save”.
- Click “Give a refund” in the “Available Credit” pop-up.
- Select “OK”.
- Choose the bank account where the deposit resides in the “Account” drop-down list.
- Select “OK”.
- Click “Save”.
Reporting and Analysis of Customer Deposits in QuickBooks Online
If you’re looking for reports of your various customer deposits, QuickBooks has two functions: “Check Detail Report” or the “Deposit Detail Report”.
To open either of these reports, you need to:
- Go to “Reports”.
- Click “Banking”.
- Choose which report you want (the “Check Detail Report” has an additional column for “Paid Amount” while the “Deposit Detail Report” doesn’t).
- Click “Modify Report”.
- Choose “Filters”.
- Pick what information you want to find.
- Click “OK” to save your selection.
- Click “Run Report” to get your custom report.
Help for All Your QuickBooks Woes
When you know how to use it, QuickBooks can be an invaluable tool for business finances. But, when you aren’t familiar with it, it can cause a cascade of problems. Luckily for you, Fourlane has experienced QuickBooks experts who are ready to help.
Contact our friendly team to learn about our services. If you want more helpful information, make sure to check out our YouTube channel.
