This video explains how to manage accounts receivable in QuickBooks Online. It covers the workflow from creating estimates to invoicing customers and receiving payments, including handling partial payments and using undeposited funds. The video also demonstrates creating invoices directly without estimates and managing overdue invoices with credit memos. Furthermore, it explores recording customer payments received via various methods, such as cash and credit cards, addressing bank fees, and utilizing the bank feed for matching transactions. Finally, the video illustrates managing billable time and expenses, utilizing delayed charges and credits, and generating customer statements for tracking transaction history.

QuickBooks Online Accounts Receivable Workflow Study Guide

Quiz

What does “accounts receivable” mean in the context of QuickBooks Online?
Briefly describe the pre-sale cycle in QuickBooks Online using the accounts receivable workflow.
What is the purpose of converting an estimate to an invoice in QuickBooks Online?
Explain two different ways to create an invoice in QuickBooks Online.
Describe the purpose of the “Receive Payment” function in QuickBooks Online and where it can be accessed.
What is “undeposited funds” and why might a business use this account when receiving payments?
Explain the purpose and process of creating and applying a credit memo in QuickBooks Online.
Describe how to record a partial payment from a customer in QuickBooks Online.
How can bank feeds in QuickBooks Online be used to manage accounts receivable, and how are fees typically recorded in this process?
What are delayed charges and delayed credits in QuickBooks Online, and when might a business use them?

Quiz Answer Key

Accounts receivable in QuickBooks Online refers to the process of recognizing a sale when a customer agrees to buy something, with the expectation of receiving payment at a later date. This workflow is used when payment is not received at the same time as the sale.
The pre-sale cycle begins when a customer expresses interest in purchasing a product or service. The business then creates an estimate (or quote) outlining the offer. If the customer accepts, the estimate is later converted into an invoice.
Converting an accepted estimate to an invoice formally documents the sale and creates a bill that the customer owes. This initiates the accounts receivable process, allowing the business to track outstanding payments.
An invoice can be created by clicking the “New” button and selecting “Invoice,” which allows for direct invoice creation. Alternatively, an accepted estimate can be converted into an invoice, carrying over all the details from the estimate.
The “Receive Payment” function in QuickBooks Online is used to record when a customer pays an outstanding invoice. It can be accessed by clicking the “New” button and selecting “Receive Payment,” directly from an open invoice, or from the “Receive Payment” button next to an invoice in the sales tab.
“Undeposited funds” (or “payments to deposit”) is a temporary holding account for customer payments that have been received but not yet deposited into the bank. Businesses use this account when they receive multiple payments that will be deposited together as a single lump sum, making bank reconciliation easier.
A credit memo is used to reduce the amount a customer owes, often due to a mistake or allowance. It is created by clicking “New” and then “Credit Memo,” selecting the customer and the amount of the credit. To apply it, you go to “Receive Payment,” select the customer, and ensure both the invoice and the credit memo are checked.
To record a partial payment, navigate to “Receive Payment,” select the customer and the relevant invoice, and then enter the actual amount received in the “Amount received” field. QuickBooks will then show the remaining balance due on the invoice.
Bank feeds allow users to match downloaded bank transactions with existing invoices in QuickBooks Online. Instead of manually recording payments and deposits, users can find matching invoices for deposits or resolve differences by adding bank fees as negative amounts within the bank feed screen.
Delayed charges are records of services or products provided to a customer that you intend to invoice later. Delayed credits are similar but represent amounts you intend to credit the customer in a future invoice. Businesses use them to track billable activities or credits without immediately creating invoices.

Essay Format Questions

Discuss the complete accounts receivable workflow in QuickBooks Online, from the initial customer inquiry to the final payment and deposit, highlighting the key steps and their importance.
Explain the different methods for receiving customer payments in QuickBooks Online, including the use of undeposited funds and direct bank deposits, and analyze the advantages and disadvantages of each method for different business scenarios.
Describe how QuickBooks Online facilitates the management of overdue invoices and customer balances, including the use of credit memos and journal entries for adjustments.
Analyze the integration of bank feeds with the accounts receivable workflow in QuickBooks Online, explaining how matching transactions and recording bank fees directly within the bank feed can streamline the accounting process.
Evaluate the features in QuickBooks Online that allow businesses to track and invoice for billable time and expenses, and discuss how these features can improve accuracy and efficiency in the billing process.

Glossary of Key Terms

Accounts Receivable (A/R): The balance of money due to a company for goods or services delivered or used but not yet paid for by customers.
Estimate: A non-binding quote provided to a potential customer outlining the cost of proposed goods or services.
Invoice: A formal bill issued to a customer for goods or services provided, indicating the amount due and payment terms.
Sales Tab: A section in QuickBooks Online that provides an overview of sales transactions, including invoices, payments, and customers.
Receive Payment: A QuickBooks Online function used to record payments received from customers against outstanding invoices.
Undeposited Funds: A temporary holding account in QuickBooks Online used to store customer payments before they are deposited into a bank account.
Bank Deposit: A QuickBooks Online function used to record the transfer of funds from the undeposited funds account or directly from a received payment into a specified bank account.
Credit Memo: A document issued to a customer to reduce the amount they owe, often due to returns, allowances, or errors.
Bank Feed: A feature in QuickBooks Online that automatically imports transaction data from linked bank and credit card accounts.
Find Match: Within the bank feed, this option allows users to link downloaded bank transactions to existing transactions (like invoices and payments) already recorded in QuickBooks Online.
Resolve Difference: Within the bank feed matching process, this feature allows users to account for discrepancies between the downloaded bank amount and the matched QuickBooks transactions, often used for recording bank fees.
Billable Time: Time tracked by employees or contractors that will be charged to a specific customer.
Billable Expenses: Costs incurred by the business that will be passed on and invoiced to a specific customer.
Delayed Charge: A record in QuickBooks Online of a service or product provided to a customer that will be added to an invoice at a later date.
Delayed Credit: A record in QuickBooks Online of an amount that will be credited to a customer on a future invoice.
Journal Entry: A manual accounting entry used to record financial transactions that are not easily captured through standard forms, often used for adjustments like writing off bad debt.
Customer Statement: A summary document showing a customer’s outstanding balance, including invoices, payments, and credits over a specific period.

QuickBooks Online Accounts Receivable Workflow Briefing Document

Date: October 26, 2023 (Based on the context of the provided text referencing December 2023 and February 2024) Source: Excerpts from “Pasted Text” (Video Transcription on QuickBooks Online Accounts Receivable)

Overview:

This briefing document summarizes the main themes, concepts, and procedures for managing accounts receivable (AR) and recognizing income in QuickBooks Online (QBO) as described in the provided video transcription. The video focuses on the end-to-end AR workflow, starting from the pre-sale stage to receiving payments and handling various scenarios like credit memos, billable time, billable expenses, and adjustments. It also touches upon utilizing bank feeds for transaction matching and generating customer statements.

Main Themes and Important Ideas:

Accounts Receivable Workflow: The core concept is that income is recognized when a sale agreement is made with a customer, potentially leading to a future payment. This necessitates the use of the accounts receivable workflow in QBO.

Quote: “accounts receivable simply means that you’re going to recognize a sale whenever the customer agrees to buy something from the business and then possibly you will get a payment on that in the future.”
The video emphasizes that if payment is received simultaneously with the sale, the AR workflow can be skipped (covered in another video).

Pre-Sale Cycle and Estimates: The process often begins with an estimate provided to a potential customer.

Creating an estimate in QBO involves selecting the customer, detailing products or services with quantities and prices, and saving the estimate.
Estimates initially have a “pending” status and can be changed to “accepted” upon customer agreement.
Quote: “the first thing you’re going to do is you’re going to give them an estimate essentially you’ll recognize that uh you’re going to make them an offer and then the customer will at some point email you back or call you back and say I’m ready to accept the offer let’s move forward and then we turn that into an invoice later on.”

Invoicing: Once an estimate is accepted, it can be converted into an invoice. Alternatively, invoices can be created directly without an initial estimate.

Converting an estimate to an invoice copies all the information, which can then be further edited.
Invoices require selecting a customer, specifying products or services, quantities, prices, invoice date, and due date based on payment terms.
Quote: “when it gets converted from pending to accepted a link to convert to invoice shows immediately essentially guiding you to the process that you should at this point invoice your client so they can pay you.”
QBO tracks invoices, allowing users to filter by all invoices or unpaid invoices.

Receiving Payments: There are multiple ways to record customer payments in QBO.

Directly from the “Receive Payment” screen: Accessed via the “+” “New” button, this requires selecting the customer and then choosing the invoice(s) being paid.
From the Invoice Screen: Opening an invoice provides an “Actions” button with a “Receive Payment” option, which pre-selects the customer and the invoice.
From the Sales > Invoices List: A “Receive Payment” button next to each unpaid invoice allows quick access.
From the Sales > Customers List: Within a customer’s details, options include receiving payment.

Undeposited Funds: This is a crucial temporary holding account for customer payments before they are deposited into the bank.

It’s recommended when receiving multiple payments that will be deposited together as a lump sum, ensuring bank reconciliation is easier.
Quote: “on depositor funds or payments to deposit should be a current asset account designed to hold your customer payments until you make the deposit.”

Recording Bank Deposits: When payments held in “Undeposited Funds” are actually deposited into the bank, a “Bank Deposit” transaction needs to be created.

This screen shows all payments in “Undeposited Funds,” allowing users to select the payments included in a specific deposit, choose the bank account, and enter the deposit date.
Quote: “essentially what you see here which is this group of transactions that are sitting here under the select the payments included in this deposit these are your undeposited funds and essentially you click on one then the other you see how it adds up…”

Credit Memos: Used to recognize a reduction in the amount a customer owes, without directly editing a previously issued invoice (especially for prior periods).

Created via the “+” “New” button, a credit memo is linked to a specific customer and details the reason and amount of the credit.
Credit memos don’t automatically apply to invoices; they need to be linked through the “Receive Payment” screen by checking the credit memo for the relevant customer.
Quote: “instead of going back and editing the invoice which is generally not suggested especially when it’s from previous periods what you want to do is you want to recognize a reduction of that account’s receivable a reduction of the money the customer owes you by creating a credit memo.”

Petty Cash: Payments can be recorded as being received into a petty cash account instead of a bank account or undeposited funds, useful for tracking cash on hand.

Funds can later be transferred from petty cash to a bank account if needed.

Handling Credit Card Fees: When a customer pays by credit card, the deposited amount in the bank might be less than the invoice amount due to transaction fees.

The full payment is initially recorded (often to Undeposited Funds).
During the bank deposit recording, the fee is entered as a negative amount, allocated to a “Merchant fees” or similar expense account, to reconcile the deposit with the bank statement.
Quote: “that difference is a fee so if I take $1,000 minus 97131 I get a amount of 28.6 and that’s the amount that the bank took from you to be able to receive uh a payment through a credit card now that’s going to be a negative amount so that’s a really important piece…”

Matching Bank Feed Transactions: QBO’s bank feed allows matching downloaded bank transactions to existing invoices and payments, streamlining reconciliation.

Instead of manually recording payments and deposits, users can “Find Match” for a bank deposit and select the corresponding invoices.
For credit card deposits with fees, the “Resolve the difference” option in the “Find Match” screen allows entering the fee as a negative amount linked to a merchant fees expense account.

Billable Time: In QBO Essentials and above, time spent on customer projects can be tracked and marked as billable.

Time activities are entered, linked to a customer, and marked as billable with a specific rate.
When creating an invoice for that customer, QBO displays any pending billable time that can be added to the invoice.
Quote: “keep in mind that this doesn’t automatically invoice your customer it just keeps it pending for you to be able to invoice them later in the future when it’s time to invoice them.”

Delayed Charges and Credits: Available in QBO Essentials and above, these features allow recording services provided or overcharges without immediately creating an invoice or credit memo.

Delayed charges serve as reminders to invoice for specific services later.
Delayed credits track amounts to be credited to a customer in the future.
When invoicing, delayed charges and credits for a customer can be added to the invoice.

Billable Expenses: In QBO Plus and above, expenses can be assigned to a specific customer and marked as billable.

When creating an invoice for that customer, the billable expense can be added to the invoice, allowing for reimbursement.
Quote: “with QuickBooks Online plus you’re able to assign an expense to a specific customer so then when we Mark that expense billable uh you’ll be able to create an invoice with that specific line item.”

Adjusting Old Accounts Receivable with Journal Entries: An advanced technique, typically used by accounting professionals, to write off uncollectible balances.

A journal entry is created to credit the Accounts Receivable account (reducing the balance) and debit an expense account like “Bad Debt” or a sales-related contra-account.
This journal entry then needs to be applied to the old invoice using the “Receive Payment” screen with a zero amount received.

Customer Statements: QBO allows generating statements to provide customers with a summary of their invoices, payments, and outstanding balances.

Different types of statements are available:
Balance Forward: Shows the opening balance, new charges, payments, and the closing balance.
Transaction Statement: Lists all transactions within a specified date range.
Open Item Statement: Shows only the unpaid invoices.
Users should explore each type to determine the most suitable one for their needs and their customers’ understanding.

Key Takeaways:

QuickBooks Online offers a comprehensive suite of tools for managing accounts receivable, from initial customer engagement to final payment.
Understanding the different stages of the AR workflow (estimate, invoice, payment) is crucial for accurate income recognition.
Utilizing features like “Undeposited Funds” and bank feed matching can significantly improve efficiency and accuracy in reconciling payments.
Credit memos and journal entries provide mechanisms for adjusting customer balances when necessary.
Billable time and expenses allow for accurate invoicing of services and costs incurred on behalf of customers.
Customer statements are essential for communicating account status and history to clients.

Next Steps:

Review the full video for detailed visual guidance on performing these actions in QuickBooks Online.
Consult additional resources mentioned in the video description for related topics like recording income without using the AR workflow, managing accounts payable, and deeper dives into bank feeds and reports.
Consider practicing these workflows in a QBO test environment to gain hands-on experience.
If using advanced techniques like journal entries for AR adjustments, ensure a thorough understanding of accounting principles or consult with an accounting professional.

Frequently Asked Questions: Managing Income with QuickBooks Online Accounts Receivable Workflow

1. What is the accounts receivable workflow in QuickBooks Online, and when should I use it?

The accounts receivable (A/R) workflow in QuickBooks Online is used to manage income recognition when you make a sale to a customer who agrees to buy now and potentially pay later. This involves several steps, starting with a pre-sale cycle (like creating an estimate), followed by invoicing the customer for the goods or services provided, and finally recording the payment when it is received. You should use this workflow when you don’t receive payment at the exact time of the sale. If you receive payment immediately, you can use a simpler method of recording income directly as a sales receipt or within the bank feed.

2. What is the typical pre-sale cycle within the accounts receivable workflow in QuickBooks Online?

The pre-sale cycle often begins when a customer expresses interest in purchasing something from your business. The first step is usually to create an estimate (or quote) outlining the proposed products or services, their quantities, and prices. If the customer accepts the estimate, you then convert the estimate into an invoice, which is the official bill you send to the customer requesting payment.

3. How do I create and manage invoices in QuickBooks Online?

You can create an invoice in QuickBooks Online by clicking the “New” button and selecting “Invoice.” You’ll then choose an existing customer or add a new one, specify the products or services being sold (including descriptions, quantities, and rates), and set the invoice date and due date based on your payment terms. You can customize the invoice and then save it, save and send it to the customer, or print it. Once created, you can track your invoices in the “Sales” tab under “Invoices,” where you can filter by all invoices or just unpaid ones to manage your accounts receivable.

4. What are the different ways to record customer payments in QuickBooks Online, and what is “undeposited funds”?

There are several ways to record customer payments:

By clicking “New” and then “Receive Payment,” which allows you to select the customer, payment date, payment method, and the invoices being paid.
Directly from an invoice by clicking the “Receive Payment” option within the invoice actions.
From the “Sales” tab under “All Sales” or “Customers,” where you can find invoices and related payment options.

Undeposited funds (or sometimes “Payments to deposit”) is a temporary holding account for customer payments that you’ve received but haven’t yet deposited into your bank account. This is particularly useful if you receive multiple payments that you deposit together as a single sum. By using undeposited funds, you can then record a single bank deposit in QuickBooks that matches your bank statement, making reconciliation easier.

5. How do I handle situations where a customer is due a credit or when an invoice needs adjustment after it has been issued?

For situations where you need to reduce the amount a customer owes without directly editing a previously issued invoice (especially from a prior accounting period), you can create a credit memo. A credit memo reduces the customer’s outstanding balance. To apply a credit memo to an invoice, you typically go to “New,” then “Receive Payment,” select the customer, and ensure both the invoice and the credit memo are checked. QuickBooks will then link the credit memo to the invoice, reducing the outstanding balance.

6. How can I account for bank fees or transaction fees when customers pay via credit card in QuickBooks Online?

When you receive a credit card payment, the amount deposited into your bank might be less than the invoice total due to transaction fees charged by the bank or payment processor. To accurately record this, you can initially record the full payment received into “undeposited funds.” When you then record the bank deposit (“New” > “Bank Deposit”), you’ll enter the actual amount deposited. The difference can be accounted for by adding a line item to the deposit screen with a negative amount, categorized to an expense account such as “Merchant Fees” or “Transaction Fees.” You can optionally specify the payment processor (e.g., Stripe) as the “Payee.”

7. How can I link billable time and expenses to customer invoices in QuickBooks Online?

QuickBooks Online (Essentials and Plus versions) allows you to track billable time and expenses. You can enter billable time through “New” > “Single time activity,” associating the time with a specific customer, service, and billable rate. When you later create an invoice for that customer, QuickBooks will show a drawer on the right side listing any pending billable time that can be added to the invoice. Similarly, in QuickBooks Online Plus, you can mark expenses as billable when entering them (“New” > “Expense”) by checking the “Billable” box and assigning the expense to a customer. These billable expenses will also appear as items to add when creating an invoice for that customer.

8. What are delayed charges and delayed credits, and how can they be used for invoicing?

Delayed charges and delayed credits (available in QuickBooks Online Essentials and above) are non-posting transactions used to track services or credits that you want to invoice to a customer at a later date. A delayed charge records work or services provided without immediately creating an invoice. A delayed credit records an amount you intend to credit to a customer’s future invoice. You can enter these through the “New” button. When you’re ready to invoice the customer, you can create a new invoice, and QuickBooks will display any outstanding delayed charges and credits for that customer, allowing you to add them to the invoice. This is useful for consolidating multiple charges or credits into a single invoice, often done at the end of a month or project.

QuickBooks Online: Managing Income Recognition

Based on the video transcript you provided, QuickBooks Online offers a comprehensive system for managing income recognition through the accounts receivable workflow. This workflow is particularly useful when a sale is recognized before payment is received.

Here’s a breakdown of the key aspects of using QuickBooks Online for this purpose, as described in the video:

Pre-Sale Activity: Estimates:
The process often begins with creating an estimate for a customer who expresses interest in buying a product or service.
You can create estimates by selecting the customer from a drop-down menu or adding a new customer on the fly, including details like name, address, phone number, and email.
Estimates can include a billing and a separate shipping address.
QuickBooks automatically assigns estimate numbers, but you can customize this sequence.
You can specify the products or services being quoted, including quantity, rate, and description.
For QuickBooks Online Plus users, inventory items can also be added to estimates.
Estimates initially have a pending status. Once the customer accepts, the status can be changed to accepted, which then provides a direct link to convert the estimate into an invoice.
Creating Invoices:
Invoices can be created directly or by converting an accepted estimate. Converting an estimate automatically copies over all the information.
You can still edit an invoice after it’s created from an estimate. Linked transactions are highlighted, showing the origin of the invoice.
When creating an invoice, you can select the invoice date and set a due date based on payment terms (e.g., net 15, 30, 60 days), which is fundamental to accounts receivable management.
You can add products and services to the invoice, specifying descriptions, rates, and quantities.
Sales tax can be enabled and calculated on taxable items (though this video focuses on non-taxable examples).
Invoices can be saved, saved and closed, or reviewed and sent directly to the customer via email or printed and mailed. Sending an invoice officially means the customer owes you money.
Managing Invoices:
All created invoices can be found under the Sales tab, in the Invoices section.
You can filter the invoice list to view all invoices or only unpaid invoices, which represent your accounts receivable.
The system displays the total amount due and indicates if any invoices are overdue based on the set terms.
Receiving Payments:
There are several ways to record customer payments in QuickBooks Online.
You can use the New button and select Receive Payment to open a blank payment screen where you choose the customer and then see their outstanding invoices.
You can also initiate payment recording directly from the invoice screen via an Actions button or from the Sales > All Invoices list using a Receive Payment button next to the invoice.
Another method is through the Customers list, where you can find an invoice and select Receive Payment from the options.
When recording a payment, you specify the payment date and payment method (e.g., check, credit card). You can customize the list of payment methods.
If you have QuickBooks Payments enabled, payments made online by customers can be automatically recorded.
For checks, you can record the customer’s check number.
You can record partial payments if a customer underpays.
A crucial decision when receiving payment is where to deposit the funds:
Directly to a bank account if you deposit individual payments immediately.
To Undeposited Funds (or Payments to Deposit) if you receive multiple payments and deposit them together as a lump sum. This helps in bank reconciliation.
Recording Bank Deposits:
If you use the Undeposited Funds account, the next step is to record the bank deposit by clicking New > Bank Deposit.
QuickBooks will display all payments held in Undeposited Funds.
You select the payments included in a specific deposit and the date the deposit was made to the bank, as well as the bank account it went into. This allows you to match your QuickBooks records with your bank statements when reconciling.
Handling Credit Memos:
If you need to issue a credit to a customer (e.g., for a mistake), you can create a credit memo. This reduces the amount the customer owes.
Credit memos are created via the New button > Credit Memo and are linked to a specific customer and the product/service for which the credit is being issued.
Credit memos do not automatically apply to invoices. You need to go to New > Receive Payment, select the customer, and then ensure the credit memo is checked to apply it to the relevant invoice. The “amount received” in this case might be zero, as you’re just matching the credit to the debt.
Managing Cash Payments with Petty Cash:
If a customer pays in cash and the cash is not immediately deposited, you can record the payment into a petty cash account (which you might need to create) instead of a bank account or Undeposited Funds.
Later, when the cash is deposited into the bank, you can record a transfer from the petty cash account to the bank account.
Handling Credit Card Fees:
When receiving credit card payments, banks often charge a transaction fee, resulting in a net deposit amount that is less than the invoice total.
You can record the full payment initially to Undeposited Funds.
Then, when recording the bank deposit (New > Bank Deposit), you select the credit card payment and enter the actual amount received from the bank.
The difference is the bank fee, which you record as a negative amount on an additional line in the bank deposit screen.
You categorize this negative amount to an appropriate expense account, such as Merchant Fees, Transaction Fees, or Credit Card Fees. You can optionally specify the bank or payment processor (e.g., Stripe) as the vendor.
Utilizing Bank Feeds:
QuickBooks Online allows you to connect to your bank accounts and download transactions via bank feeds.
Instead of manually recording payments and deposits, you can match bank feed deposits with existing invoices. By clicking on a deposit transaction in the bank feed, you can select Find Match and then choose the invoices that correspond to that deposit.
When a bank feed deposit reflects a credit card payment with a fee, you can match the gross payment to the invoices and then use the Resolve Difference option to add a negative amount for the fee, categorizing it to the merchant fees expense account.
Working with Billable Time and Expenses:
Billable Time (requires QuickBooks Online Essentials or higher): You can track time spent on a customer’s work and mark it as billable. This time can then be easily added to an invoice for that customer.
Delayed Charges and Credits (requires QuickBooks Online Essentials or higher): You can record services or charges incurred for a customer without immediately invoicing them using delayed charges. Similarly, you can record delayed credits. These can be compiled and added to an invoice at a later date.
Billable Expenses (requires QuickBooks Online Plus or higher): You can assign expenses (e.g., shipping costs) to a specific customer and mark them as billable. These expenses can then be added to the customer’s invoice for reimbursement.
Adjusting Accounts Receivable with Journal Entries:
For advanced users (like accounting professionals), journal entries can be used to directly adjust accounts receivable balances, for example, to write off old, uncollectible debts. This involves debiting a bad debt expense (or similar) account and crediting the accounts receivable account for the customer.
After creating the journal entry, you still need to go to New > Receive Payment, select the customer, and match the journal entry to the outstanding invoice to clear it from the accounts receivable aging report.
Creating Customer Statements:
QuickBooks Online allows you to generate customer statements that show the history of invoices and payments for a specific customer.
You can choose from different types of statements, such as Balance Forward, Transaction Statement, and Open Item Statement, each presenting the information in a slightly different way. You should review each type to determine which best suits your needs and your customers’ understanding.

In summary, QuickBooks Online, as described in the video, provides a robust set of tools for managing the entire accounts receivable cycle, from creating initial estimates to receiving and recording payments, handling various payment scenarios, and generating customer statements. It also includes features for handling more complex situations like credit memos, petty cash, credit card fees, billable time and expenses, and adjustments via journal entries. The integration with bank feeds further streamlines the process of matching payments to invoices.

QuickBooks Online Accounts Receivable Management

Based on the video transcript and our previous discussion, Accounts Receivable (AR), as described in the context of QuickBooks Online, is the process of recognizing income when a sale is made (i.e., when a customer agrees to buy something) and managing the money owed by customers who will pay in the future. It’s a crucial aspect of business operations when payment is not received at the time of the sale.

Here are the key concepts related to Accounts Receivable as discussed in the source:

Triggering Accounts Receivable: The AR process begins when a sale is recognized, often documented through an estimate provided to the customer. Once the customer accepts the offer, the estimate is converted into an invoice. The act of sending an invoice officially signifies that the customer owes the business money.
Managing Outstanding Invoices: QuickBooks Online provides tools to keep track of all outstanding invoices. The Sales tab allows users to view a list of all invoices, filter them by status (e.g., unpaid), and see the total amount due. The system also tracks due dates based on the payment terms set on the invoices.
Receiving Payments: A significant part of AR management is recording payments from customers. QuickBooks Online offers multiple ways to do this, ensuring that the payment is correctly applied to the outstanding invoice.
Payments can be recorded as going directly to a bank account or to an interim account called Undeposited Funds (or Payments to Deposit). The latter is recommended when multiple payments are deposited together.
QuickBooks Payments, if enabled, can automate the recording of online payments.
Applying Payments to Invoices: When recording a payment, QuickBooks allows you to select the specific invoice(s) the payment is for, including the option for partial payments.
Handling Overpayments/Underpayments: While not explicitly detailed, the ability to record partial payments suggests the system can handle situations where the payment doesn’t exactly match the invoice amount. Credit memos, discussed below, can address overpayments or billing errors indirectly.
Credit Memos: When a business needs to reduce the amount a customer owes after an invoice has been issued (e.g., due to a mistake), a credit memo is created. Importantly, credit memos need to be manually applied to the relevant invoice through the receive payment screen.
Adjusting Accounts Receivable: In more advanced scenarios, such as writing off old, uncollectible debts, journal entries can be used to directly adjust the accounts receivable balance. These adjustments then need to be applied to the corresponding invoices using the receive payment function.
Reporting and Review: QuickBooks Online provides reports like the Accounts Receivable Aging report to help businesses understand how long invoices have been outstanding. Additionally, customer statements can be generated to show customers their outstanding balances and payment history.
Integration with Bank Feeds: QuickBooks Online allows for the matching of bank deposits with outstanding invoices recorded in the system, streamlining the AR process by reducing the need for manual payment recording in some cases. This also includes handling bank fees associated with credit card payments.
Billable Time and Expenses: For service-based businesses, QuickBooks allows the tracking of billable time and expenses, which are then converted into invoices, effectively managing these aspects within the AR framework.
Delayed Charges and Credits: These features allow for the recording of services or credits that will be invoiced to the customer at a later date, ensuring that all billable activities are captured within the AR cycle.

In essence, Accounts Receivable management within QuickBooks Online, as described in the source, is a systematic approach to tracking sales made on credit, ensuring timely invoicing, diligently recording customer payments, and managing any necessary adjustments or credits to maintain accurate financial records. The various workflows and features aim to streamline this process, providing businesses with a clear overview of the money owed to them.

QuickBooks Online: Invoicing Customers

Based on the video transcript, invoicing customers is a central part of the accounts receivable workflow in QuickBooks Online. It’s the process of formally billing a customer for goods sold or services rendered, thereby establishing the amount they owe to the business.

Here’s a breakdown of how invoicing customers is discussed in the source:

Creating an Invoice:
An invoice can be created directly or by converting an existing estimate that has been accepted by the customer.
To create a new invoice directly, you can click on the “New” button and then select “Invoice”.
You can select an existing customer from a drop-down menu or add a new customer on the fly by providing their name and other details like address, phone number, and email.
Each invoice has an invoice number, which QuickBooks automatically sequences but can be customized.
You can set the invoice date to reflect when the service was provided or the product was delivered.
The due date for payment can be selected based on predefined net terms (e.g., 15, 30, or 60 days from the invoice date), which QuickBooks will calculate.
Adding Products and Services:
On the invoice screen, you select the specific products or services being sold to the customer.
You can specify the quantity and rate for each item.
A description of the product or service can be added to provide clarity for the customer.
QuickBooks Online Plus allows for the inclusion of inventory products on invoices.
The system automatically calculates the total amount due based on the quantities and rates of the items.
Saving and Sending Invoices:
Once the invoice is complete, you have several options:
“Save”: This saves the invoice within QuickBooks Online without sending it.
“Save and Close”: This saves the invoice and closes the invoice window.
“Review and Send” or “Save and Send”: These options allow you to email the invoice directly to the customer or print it for mailing.
Link to Estimates:
When an invoice is created from an estimate, QuickBooks copies over all the information from the estimate, including products, services, descriptions, and prices.
The invoice maintains a link back to the original estimate, creating a transaction history for tracking.
Creating Invoices Without Estimates:
It’s important to note that creating an estimate is not a mandatory step in the invoicing process. You can create invoices directly without any prior estimate.
Managing Invoices:
After invoices are created, they can be found in the “Sales” tab under “Invoices”.
You can view a list of all invoices or filter them to see only unpaid invoices, which represent the amounts in accounts receivable.
Invoicing Billable Time and Expenses:
QuickBooks Online (Essentials and above) allows you to track billable time and then add these time entries to a customer’s invoice.
Similarly, in QuickBooks Online Plus, you can mark expenses as billable to a specific customer and then include these expenses on their invoice for reimbursement.
Delayed charges and delayed credits can be used to record services or credits that will be added to a customer’s invoice at a later date. When you create an invoice for that customer, these delayed items will appear as potential additions.

In summary, the source emphasizes that invoicing is the formal step in the accounts receivable process where a business communicates to its customers the details of a sale and the amount due. QuickBooks Online offers various features to create, customize, send, and manage these invoices, ensuring that businesses can effectively track and collect the money owed to them.

QuickBooks Online: Receiving Customer Payments

Based on the video transcript, receiving payments is a crucial step in the accounts receivable workflow in QuickBooks Online. The source outlines several ways to record customer payments and important considerations during this process.

Here’s a detailed discussion of receiving payments as described in the source:

Multiple Ways to Initiate Receiving a Payment:
You can click the “New” button and then select “Receive Payment” under the “Invoice” section. This opens a blank “Receive Payment” screen where you need to select the customer.
You can go to the “Sales” tab, then “Invoices”, and click the “Receive Payment” button located next to the specific invoice you want to record a payment for. This method automatically populates the customer and the invoice details.
While viewing an invoice, you can click the “Actions” button and then select “Receive Payment”. This also automatically selects the customer and the invoice.
From the “Customers” list (under the “Sales” tab), you can select a customer, find the specific invoice, and choose “Receive Payment” from the available options.
Recording Payment Details on the “Receive Payment” Screen:
You need to select the customer who made the payment. QuickBooks will then display all outstanding invoices for that customer.
Enter the date on which you received the payment.
Choose the payment method from a pre-built list or create your own (e.g., check, cash, credit card). This is primarily for internal tracking.
If the payment was made by check, you can record the customer’s check number.
Handling Full and Partial Payments:
In the “Amount Received” field, you can enter the total amount the customer paid.
If the customer made a partial payment, you enter the partial amount and then select the invoice(s) you want to apply the payment to, specifying the amount for each if necessary.
If the customer paid the full amount, ensure that the amount entered matches the total due on the selected invoice(s).
The Importance of the “Deposit To” Account:
Before saving the payment, you need to decide where the funds are initially recorded.
Directly to a Bank Account: If you deposit the payment directly into your bank account as a single transaction, you can select your bank account in the “Deposit To” field.
Undeposited Funds (or Payments to Deposit): If you receive multiple payments that will be deposited together as a lump sum, you should select “Undeposited Funds” (or “Payments to Deposit”) as the “Deposit To” account. This is a temporary holding account. Using this method helps ensure that your QuickBooks records match your bank statements when you make the actual deposit. To record the deposit of these funds into your bank account, you’ll later use the “Bank Deposit” function under the “New” button.
QuickBooks Payments: If you have QuickBooks Payments enabled, the system can automatically record payments received online or through credit card charges processed within QuickBooks.
Applying Payments to Invoices: When you select a customer on the “Receive Payment” screen, QuickBooks will list their outstanding invoices. You need to check the box next to the invoice(s) being paid. The amount of the payment will be automatically applied to the selected invoices, but you can adjust these amounts if it’s a partial payment.
Receiving Cash Payments and Using a Petty Cash Account: If you receive a cash payment that is not immediately deposited into the bank, you can create a “Petty Cash” account (or another similar account) and select that as the “Deposit To” account. Funds in this account can later be transferred to the bank or used for business expenses (although managing petty cash involves a separate workflow).
Handling Credit Card Payments and Bank Fees:
When a customer pays with a credit card, you might receive a net amount in your bank account after the bank deducts a transaction fee.
The source recommends recording the full payment amount as received (and potentially depositing it to “Undeposited Funds”).
The bank fee is then recorded as a separate transaction during the “Bank Deposit” process. When making the bank deposit for the credit card payment, you’ll enter the actual amount received from the bank and then add a negative line item for the merchant fees (or transaction fees), specifying the appropriate expense account (e.g., “Merchant Account Fees”) and optionally the vendor (e.g., Stripe).
Matching Bank Feed Transactions: QuickBooks allows you to connect to your bank accounts and use the bank feed to match downloaded transactions with entries in QuickBooks.
If a deposit in the bank feed corresponds to one or more invoices, you can use the “Find Match” option to select the relevant invoices instead of categorizing the deposit.
When the total of the matched invoices doesn’t equal the bank deposit amount (due to fees), you can use the “Resolve the Difference” option to add a line for the fee, similar to the bank deposit process for credit card payments.
Applying Credit Memos: Even though you’re not receiving a cash payment, you use the “Receive Payment” screen to apply a credit memo to an outstanding invoice. By selecting the customer and ensuring both the invoice and the credit memo are checked, QuickBooks will match them, reducing the outstanding balance.
Applying Journal Entries: Similarly, to clear an old outstanding balance using a journal entry (which directly reduces the accounts receivable balance), you use the “Receive Payment” screen. Select the customer, and with both the old invoice and the journal entry checked, QuickBooks will apply the journal entry, resulting in a zero amount received but effectively closing the invoice.
Saving the Payment: Once all the necessary information is entered and the payment is correctly applied, click “Save and Close” or “Save and New” to record the payment.

The source emphasizes the importance of choosing the correct “Deposit To” account to ensure accurate bank reconciliation. It also highlights that while there are multiple workflows to initiate receiving a payment, they all lead to the same “Receive Payment” screen for recording the details.

QuickBooks Online: Recording Bank Deposits

Based on the video transcript, bank deposits are a critical part of the accounts receivable workflow in QuickBooks Online, representing the final step where customer payments are recorded as entering your bank account. The source details several scenarios and methods for handling bank deposits.

Here’s a breakdown of how bank deposits are discussed:

Depositing Payments Directly to the Bank Account:
If you receive a single payment and deposit it directly into your bank account as one transaction, you can select your bank account in the “Deposit To” field on the “Receive Payment” screen. In this scenario, the payment record in QuickBooks directly reflects the deposit in your bank.
Using Undeposited Funds for Later Deposits:
The source strongly recommends using the “Undeposited Funds” (or sometimes “Payments to Deposit”) account when you receive multiple customer payments that will be deposited together as a single lump sum at the bank. This is a temporary holding account.
The rationale is to ensure that your QuickBooks records accurately match your bank statements. When you look at your bank statement, you’ll see one total deposit, and recording individual payments directly to the bank would not reflect this consolidated deposit.
Recording the Actual Bank Deposit from Undeposited Funds:
To record the consolidated deposit in QuickBooks after using “Undeposited Funds,” you click on the “New” button and then select “Bank Deposit” under the “Other” section.
The “Bank Deposit” screen will display all the payments you have previously recorded into the “Undeposited Funds” account.
You then select the individual payments that were included in the actual bank deposit. QuickBooks will show the total amount of the selected payments.
You need to enter the date of the actual deposit into your bank account and choose the bank account where the funds were deposited.
Finally, you click “Save and Close” to record the bank deposit. This process moves the money from the temporary “Undeposited Funds” account to your designated bank account in QuickBooks, matching your bank records.
Handling Credit Card Payments and Bank Fees During Deposit:
When you receive credit card payments, the funds deposited into your bank account might be less than the total amount charged to customers due to bank transaction fees.
The suggested workflow is to initially record the full credit card payment as received (potentially to “Undeposited Funds”).
When you go to record the “Bank Deposit” for these credit card payments, you will enter the actual net amount that was deposited by the bank.
To account for the difference (the bank fee), you add a negative line item on the “Bank Deposit” screen.
For this negative entry, you need to select the appropriate expense account for merchant fees or transaction fees (e.g., “Merchant Account Fees”). You can optionally specify the bank or payment processor (e.g., Stripe) as the payee (entered as a vendor).
The negative amount of the fee will reduce the total deposit amount in QuickBooks to match the actual amount deposited in the bank.
Matching Bank Feed Transactions to Invoices (Skipping Manual Deposit Recording):
QuickBooks Online allows you to connect to your bank account and use the bank feed to download transactions.
If a deposit appears in the bank feed that corresponds to one or more customer payments (and you haven’t manually recorded the “Receive Payment” and “Bank Deposit” steps), you can use the “Find Match” option.
This allows you to select the open invoices that the deposit is intended to pay. By matching the deposit to the invoices, you effectively record the payment and the deposit simultaneously.
If a bank feed deposit for credit card payments is for a lesser amount than the total of the matched invoices, you can use the “Resolve the Difference” feature to add a negative entry for the merchant fees, similar to the manual bank deposit process.
Transferring Funds from Other Accounts to the Bank:
The source briefly mentions transferring funds into the bank from other accounts, such as a petty cash account. This is done using the “Transfer” function under the “New” button, specifying the source account (e.g., Petty Cash) and the destination bank account, along with the amount and date of the transfer.

In summary, the video highlights that accurately recording bank deposits is essential for maintaining correct financial records in QuickBooks Online and for successful bank reconciliation. It emphasizes the importance of using “Undeposited Funds” for batched payments and correctly accounting for bank fees associated with credit card transactions, either through the manual “Bank Deposit” function or by utilizing the “Find Match” and “Resolve the Difference” features within the bank feed.

QuickBooks Online: Recording Income/Invoices (Accounts Receivable)

The Original Text

in this video we’re going to talk about how to recognize income in QuickBooks Online using the accounts receivable workflow accounts receivable simply means that you’re going to recognize a sale whenever the customer agrees to buy something from the business and then possibly you will get a payment on that in the future if you were recognizing a sale at the same time that you’re getting paid then there would be no need for you to use the accounts receivable workflow and you want to check out another video that I have focused on recognizing income or recording income in QuickBooks by skipping everything we’re going to talk about in this video so check that video out the link should be on description we’re going to get started in QuickBooks online and we’re going to start with sort of the pre-sale cycle so a customer calls you and says hey I want to buy something from you a product or a service and the first thing you’re going to do is you’re going to give them an estimate essentially you’ll recognize that uh you’re going to make them an offer and then the customer will at some point email you back or call you back and say I’m ready to accept the offer let’s move forward and then we turn that into an invoice later on so let’s start by creating an estimate I’m just going to click on the drop- down menu select the customer I want to send the estimate to I could click on add new and create the customer on the fly so if I have a new customer and her name is Mary S Smith and I can add her address her phone number email all that information and then I click on Save and then that customer gets loaded into my database in QuickBooks you can have a build to address and also a ship to address so if you’re shipping products or delivering services on site you can use that shipping address to identify that then the estimate number is going to follow a natural sequence QuickBooks will start when one01 but you can create your own sequence if you want to when you’re first getting started so I’m going to do 4,000 501 and that would be the first one then every time I do an estimate then the next one will follow soon then I’m going to click on the drop- down menu to confirm the estimate date and then we’re going to scroll down onto products and services and then we pick the specific product and service that we are estimating or quoting this customer I’m going to pick Services here and I’m going to do two two quantity2 $75 and then on the description I’m going to put $75 per hour for support okay whatever service you’re providing you just put there the description of what you’re what you’re want to sell that customer you can add any additional notes any additional lines if you want to if you’re working with QuickBooks Online plus you can even add inventory that you’re selling them you can actually sell inventory products and then at the end simply we have an estimate for $150 I’m going to go ahead and click on Save and now the estimate has been saved into the system now by default estimates start in pending status so hopefully your customer will say yes agree to buying this service from you and essentially the best thing to do is to switch the estimate from pending down to accepted now notice that when it gets converted from pending to accepted a link to convert to invoice shows immediately essentially guiding you to the process that you should at this point invoice your client so they can pay you so I’m going to click on convert to invoice and then QuickBooks will take the same estimate that we just created and essentially create the invoice for you copy over all the information like the products and the services that you’re selling including descriptions prices all that stuff you actually allowed to change uh an invoice after the estimate so let’s say this actually took three hours and at two hours you can make that change now you do have a um a connected transaction next to it you see that is highlighted green letting you know that that’s a link transaction and if I screw up to the top it says link transactions as well I can actually click on that and it’ll open the estimate for me so it creates this history so you know exactly that this invoice came from an estimate originally then we can accept uh the invoice number where it is we can change the invoice date to whenever you actually provided that service or deliver that product you can select the due date uh based on your net terms so if it’s you know 15 days QuickBooks will calculate 15 days from the invoice date if you select 30 or 60 it will calculate the due date from that invoice date and that’s the essence of account receivable management which is you’re generating a bunch of invoices and you’re keeping track of the customers that owe you money and eventually they need to pay you so once we’re done we can either click save or we can click on review and send if you want to actually email the invoice to our customer so we’re going to go ahead and send the invoice to a customer or print it and mail it to them and that’s it now that customer officially owes us money now I want to create an invoice without regard of the estimate so you can see that that workflow flow you actually don’t need to create the estimate prior that was just an example for those that need to do that so I’m going to click on the new button on the top left and then click on invoice and that can take me straight into the invoice screen no linkages or workflow from an estimate if I click on the drop down menu I can pick a customer from the existing list or maybe a different customer let me pick customer a and then I’m going to scroll down and then select the products and services that I want to sell that customer so let’s say I want to sell this customer customer services I’m going to put um hourly support and I’m going to put here level two Tech and let’s say that we have for our level two technician we actually charge uh $100 an hour so I’m going to put here three hours for $100 an hour and you see that the total adds up to 300 now if I also have uh maybe a product that I’m selling them where there’s inventory or not you can add that additional line and we can put here miscellaneous cables and let’s say say this is a charge for $25 now if you have sales tax enabled and I have an entirely different video that focuses on sales tax I’ll put the link in the description whichever item you mark As taxable QuickBooks will calculate tax for that item I’m going to go ahead and uncheck both the items because we’re going to make the assumption that these items are not taxable or the sale is not taxable here at the right hand side you have some information about billable time we’re actually going to go back to that so now we have a total down here of $325 for the invoice again we can save it we can do save and close or we can save and send to our customers let me click on Save and close and now we have officially created uh two invoices now once you create your invoices you can actually go into the sales tab on the left hand side and then click on where it says invoices and then you’re going to get a list of all the invoices that you have in the system you can actually filter by all invoices including every invoice you ever created and you’ve been paid for already or just invoices are unpaid which are the ones that are currently in accounts receivable you see up here that there’s a $550 due it says not yet that means they’re not overdue yet and if you see down here in the bottom you get to see both amounts 225 and 325 we just created notice that there’s a status here in terms of due date based on what terms we use to create those invoices so that’s that was the first step just essentially just creating an invoice the Second Step would be to receive payments so there’s a couple of ways to receive payments we can simply go into the new button on the left hand side and then under invoice there is a button that says receive payment we can start the process from there if we start the process from there we’re going to go into a blank receive payment screen and then I have to click from the drop- down menu which customer paid me so I’m going to go ahead and select Mary Smith and then once I select the customer QuickBooks will show show me all the outstanding invoices are for this specific customer I’m going to pick the date in which the customer the date that I actually received the payment the payment method and there’s a pre-built set of payment methods you can create your own this is just for internal tracking so let’s say I’m going to put check and note if you have payments enabled in QuickBooks Online which is an additional service you can actually get a credit card number from your customer and charge it electronically through here or you can send the invoice to the customer they can pay you and if you use that service the payment gets automatically recorded in your behalf so you actually don’t have to go into this extra step and record the payment because QuickBooks is smart enough to know that if the customer paid you through their system they might as well create the payment for you now when you receive the payment and let’s say for example it’s a check I can put here the check number that the customer gave me so their check number I can put in here and there where it says amount received I can either select a part partial amount so if your customer underpay you you can put let’s say if they only pay you $100 you receive a partial amount and then you select the invoice that you want to apply the $100 to and then you select um the amount that you’re going to apply to that specific invoice if the customer pay you in full just type there the full amount and the full amount here in the top should um calculate for you as well so make sure that if they did pay you in full that you have both the full amount in the top and then the full amount up apply to the specific invoice you want to apply to now before we click save and close and accept this payment it’s really important to make the decision and this this is based on what’s happening with your business on whether or not this specific payment is going to go straight into the bank one to one so you’re going to have one payment and you’re going to make one deposit with a single payment or if you often receive multiple payments through the week and maybe once or twice a week you take a bunch of payments and make one single deposit now maybe you do electronic deposits with your with with your phone or with a scanner but essentially if you lump all the deposits together uh into a single deposit and then when you look at the bank statement you don’t see each individual payment you see one lump sum deposit then what you want to use instead of using the bank account as a deposit to account you want to use this account called undeposited funds so I’m going to do an example of that for now I’m just going to put it here in this Chase payroll account and we’re just going to have that to 25 bucks itself go in there and then when we do the other example it’s going to make sense when we show you that and then I click on Save and close and then essentially that completes the account’s receivable workflow when we go from in this case from estimate to invoice and then for to payment straight into the bank now let’s create one more invoice I’m going to go to new invoice and then I’m going to select a different customer click on the drop down menu and click customer B I’m going to select my services item and then put here here 5 hours at $75 an hour and we’ll put here hourly support again and then we’ll click on Save and close so now we have uh two outstanding invoices as if we go back into this screen here I’m going to refresh the all invoices screen now we have two outstanding invoices the one for customer a and one for customer B and I’m going to receive payments for each of these invoices but now I’m going to use this on dep positive funds account because I’m actually going to make one sum deposit for the whole 700 and I want that to match my bank whenever I go reconcile my bank so I’m going to receive the payments uh for these invoices but instead of going into new receive payment I’m going to use a different technique which is I’m going to open the invoice directly and then while I’m looking at the invoice on the screen I’m actually going to click on receive payment so I’m going to click on the actions button and then click on receive payment when I do that the payment screen opens but then one more step happens in your behalf which is it automatically selects the customer for you so you don’t have to go out there and select the customer again and it also automatically applies the invoice for you implying that this is exactly what you’re trying to do because you open the invoice in the first place and then clicked on receive payment so it just saves you a step because contextually that’s what you were trying to do now because I’m going to lump suum this deposit together with a different payment I don’t want to put this deposit in the bank on this screen I want to put it in this account called undeposited funds sometimes that’s called payments to deposit depending on how your QuickBooks file is set up but on depositor funds or payments to deposit should be a current asset account designed to hold your customer payments until you make the deposit we’re going to show you what that workflow looks like so let’s say they paid me with a check and we’ll put here the check number from the customer and then we’ll click on Save and close now I’m going to show you one more different workflow for receiving that payment I’m going to go into sales and click on all invoices and then notice that next to the invoice there’s a button that says receive payment so you can basically click on that and it will take you into the receive payment screen but I’m going to show you one more workflow I’m going to ex out of that going to uh sales and then under customers and let’s say I’m looking at the specific customer in the customer details window and then I’m looking looking at the specific invoice and then from here I can actually click on receive payment with within the options that it gives you notice it gives you tons of options but receive payment is one of the options so we’re going to go ahead and click on that so whichever way you decide to do it it’s going to end end you up at the exact same screen on the received payment screen then I’m going to select check let’s say this customer also pay me with a check and then we also have to make the decision to put this either on the bank account or in the undeposited funds or pay P to deposit account because again we want to choose this option that way we can do one more transaction which is Lum suum those payments together so I’m going to go ahead and click on Save and close and now I have both of those payments received and they’re sitting there in undeposited funds waiting for me to make or record that deposit so the next step to record the deposit is to click on new and then we’re going to go here where it says other we’re going to click on bank deposit once we click on bank deposit it you will notice that QuickBooks actually keeps track of every single payment you have received that you put into this account called on deposited funds essentially what you see here which is this group of transactions that are sitting here under the select the payments included in this deposit these are your undeposited funds and essentially you click on one then the other you see how it adds up to $700 here on the top right and essentially you’re going to say okay I got both of those payments on Monday but I didn’t make it into the bank until maybe Wednesday the 7th that’s the day that both of these Depo payments are going to be deposited into a single deposit and then we select the bank account that we’re going to deposit it into and then we click on Save and close so that’s how you do that workflow where you receive the payments into undeposited funds and deposit them together okay we’re going to talk about a little bit of more advanced technique which is working with credit memos so I’m going to go into the new button and create another invoice I’m going to click on new invoice and then I’ll select my customer we’ll select customer a one more time and then we’ll select any product or service and we’ll put we’ll put an amount here we’ll just put 1,000 now I’m going to backdate this invoice a couple of months ago we’ll put this back in December of 2023 and then we’ll click on Save and close and now there’s a $1,000 invoice outstanding now I’m going to click on sales and invoices and then click on unpaid so we can see the totality of our open invoices notice that this invoice is overdue $1,000 because it’s way past the payment deadline now let’s say that during this process I don’t want to edit or change an invoice from the prior year but I want to recognize that we maybe made a mistake on the job and we’re going to give this customer a $300 credit for example so instead of going back and editing the invoice which is generally not suggested especially when it’s from previous periods what you want to do is you want to recognize a reduction of that account’s receivable a reduction of the money the customer owes you by creating a credit memo so we’re going to click on the new button and then click on credit memo and then we’re going to select the customer that we’re giving the credit memo to click on the drop down menu and click on customer a then we’re going to select which product or service essentially we are refunding them it’s not really a refund because we’re not giving them cash we’re just adjusting their uh their open invoice but it’s technically a refund from a sales perspective because we had a sale in 2023 but now we’re refunding it in 2024 so it’s technically a an income refund but there’s no cash being exchanged we’re just going to receive the balance of the payment when the customer gets to gets to pay us so we’re going to select the product or service that we’re adjusting we’ll put here $300 and we can put uh recognizing our mistake for late delivery or something like that okay now depending on exactly whatever the circumstances are you want to make sure that that memo and that description it’s uh is well understood by any user in QuickBooks so we’ll go ahead and click on Save and close and now the credit memo is um entered automatically now this invoice if I open this invoice it still shows as it having an outstanding $11,000 and the reason for that is because credit memos don’t always automatic Ally apply to the invoice you actually have to take the credit memo and apply to the invoice by using the payments screen so I’m going to go into new and click on receive payment even though I’m actually not receiving a cash payment all I’m doing is I’m going to match that credit memo to that invoice so I’m going to select customer a and then I’m just going to make sure that this credit memo is checked so a quick books starts the process for you notice that you put a check mark on it and as long as you see that credit memo check box they’re being applied to the invoice and then here where it says amount received is nothing because essentially you’re not actually receiving the payment QuickBooks will through this transaction as long as you save it now match that credit memo to the invoice now you could put in the in the memo down here at the bottom you can put applying uh credit memo or something like that you really don’t need to do it it should be pretty self-explanatory but that’s essentially what this does it takes that that credit memo that was was sitting by itself unapplied and applies it to the invoice so then when I click on Save and close now I go back into this screen I can click on refresh and now this invoice should show up as an open balance of 700 uh no longer an open balance of uh 1,000 so I just click on the invoice and notice here that says balance du 700 Now by default in this screen it shows you the original amount of the invoice if I actually click on this little gear button on the right hand site where it says action I can actually click on the little checkbox for balance and I can actually see both the $1,000 that are from the original invoice amount and the actual open balance from the invoice it gives you a little bit better visual so let’s say that now the customer is ready to pay you and they’re going to pay you the $700 so I’m going to click on new receive payment and I’m going to add one more wrench into this whole thing just to give you a new example is I’m going to go ahead and select the customer but this time around my C your customer is paying you in cash but the cash is not even being deposited so I’m going to instead of putting it on deposited funds I’m actually going to put it into something called a petty cash account so I’m going to go into add new and then I’m going to create an account called petty cash click on Save and close and then I’m recognizing that I received $700 in cash to pay off the invoice but the money is not even going into the bank I’m going to put it in the petty cash and I as the invoice is being applied here you have it going into petty cash then you click on Save and close so perfect you have no more invoice open if I refresh on the screen it should show that we have zero amount due for invoices now once it comes time to put the cash from the petty cash account into the bank you can simply just do a transfer so we’re going to go to the new button and then click on transfer and let’s say that you know something happened with that cash it was maybe used for some business purpose purposes and I’ll do an entirely different video about managing petty cash cuz that’s a whole another world but let’s say that the the cash that was in the petty cash account that ended up uh that came from the customer but ended up making it into the bank was maybe $500 and not $200 then you end up doing the transfer here you can put in the memo saying you know uh customer a payment and then put uh $200 where used for gas or something like that but you actually need to go back into that Payday Cash account and record those expenses again that’s an entirely different video entirely different workflow but I think it is important to understand that sometimes you will get payments are in cash now I’m going to show you one more interesting workflow which is when you receive payment with a credit card and then when you deposit money into the bank you actually don’t get the entire invoice amount in the bank the bank actually charges you a transaction fee for being able to use a credit card to receive the money so I’m going to go to the new button and create a new invoice I’ll select one of these customers again pick a product or service I’m going to choose $1,000 one more time and then I’m going to click on Save and close and let’s say now that the money for that in customer payment came into the bank it actually came in for $971 31 right because the bank took a percent as a fee so we’re going to go into new receive payment we’re actually going to receive the payment uh as a whole so we’re not going to record in the receive payment screen the fee and we’re going to select here a credit card let’s say American Express deposit to we are going to send it on deposited funds just like when you get a bunch of checks and deposit them together same thing happens with credit cards where a multiple people pay you with a credit card and essentially the whole amount settles with the fee so we’ll go ahead and click on Save and close so now that payment is sitting in on deposited funds and you can have maybe multiple invoices with payments in undeposited funds and you’re going to do one more step which is going to go into new bank deposit and then we’re going to select the the the the payment but you’re not going to receive $1,000 you’re going to receive 97131 as I mentioned earlier so that difference is a fee so if I take $11,000 minus 97131 I get a amount of 28.6 and that’s the amount that the bank took from you to be able to receive uh a payment through a credit card now that’s going to be a negative amount so that’s a really important piece because once you put that into negative you notice in the top the total is 97131 now the most important thing is to put the account that this belongs to so normally it would be an account called Merchant fees or transaction fees or something like that uh in my particular chart of accounts is called merchant account fees so as long as you have an account called again Merchant fees credit card fees transaction fees stripe fees PayPal fees uh whatever account you create that’s represents that you put that in there now on the receive from you actually don’t need to put anything here if you want to you can put the actual bank’s name the bank that is taking the money away so let’s say this is a stripe or something like that we can actually create stripe uh in there as a vendor I typically like to do that as a vendor not a customer and that way you know okay that’s a fee that we’re paying to stripe so it becomes uh very clear so that’s up to you you actually don’t need to put U the receipt from vendor’s name there I know it’s a little confusing because you’re not really receiving anything they’re actually taking money away which is why is a negative amount so it’s like a negative receiving right it means that they’re taking away but essentially that illustrates it you can have multiple invoice payments in here that are going to be paid in full because the customer from their side they’re paying you 100% essentially the bank is the one that’s taking a fee at the very end which is why you’re receiving a lesser amount at the end so that little piece here that’s really important some people actually will break it up so if you have like three payments they’ll go inad and break up for the first invoice it was this amount for second invoice is this amount for third invoice is this amount if you want to keep that level of detail normally I just add all the fees for that one deposit and put it in there so we’ll click on Save and close and that completes that process now we’re going to shift gears to a slightly different workflow which is when you uh create re invoices and you manage accounts receivable but when you go record the deposits you actually don’t use the new record deposit screen you actually use the bank feed screen so I’m going to go into transactions and go into bank transactions and let’s say for example that you’re going to want to match your uh transactions from whatever you’re seeing in the bank feed screen so for example we see a teller deposit for $5,000 and then we see a stripe deposit for $96.89 so I’m going to recreate the type of transactions that you would basically match into your bank feed so I’m going to start with a couple of uh invoices that add up to the 5,000 so I’m going to go to new go to invoice go to customer a and then quickly create an invoice let’s say for $2,000 and then I’m going to click on uh save and new and I’ll create the other invoice that adds up to $3,000 so let’s go in here and we’ll make this one $33,000 and then we’ll do save and new again so now we have a $5,000 deposit that’s coming in through the bank feed and now we need to match the two invoices that add up to the5 ,000 so I’m going to click on the 5,000 transaction that’s in there and instead of selecting categorize I’m going to click on where it says find match then when I click on find match I’m going to get a list of all my open invoices and all the payments that I have received and then QuickBooks will attempt to try to match the two invoices for you now if QuickBooks doesn’t match them you can manually go and select the combination of invoices that would match that deposit and of course you need to verify with your records if that’s actually the customers are paying you not just because the dollar amounts match you have to make sure it’s the correct one because if you end up telling the wrong customer that they owe you money when they actually did pay you because you confused a different customer’s invoice that had the same dollar amount that’s going to be pretty embarrassing but that it’s a pretty simple workflow you just selected to invoices that match that amount and you click on Save and essentially you didn’t have to click on receive payment and you didn’t have to click on record deposit because the money was already downloaded as a transaction through the bank feed you can simply just match at that payment with outstanding invoices I’m going to do the exact same thing with this 9689 but instead I’m going to create two transactions that add up to $100 and I show you how to record the fee with uh within the bank feed so I’m going to go to new and go to invoice and then let’s say we have an invoice for customer a in this case for $60 and then we’ll do save a new and do an invoice for customer B now for $40 and the addition of those two should add up to 100 so it should be pretty simple and then we can save and close perfect now going back into the bank feed there’s my $96.89 I’m going to click on that I’m not going to click on ADD and I’m not going to click on categorize I’m actually going to click on where it says find match we’ll click on find match we’ll select the two invoices that add up to $100 now you will notice that QuickBooks automatically assumes that one of the invoices is being short paid so you have to be very careful about this particular step here you actually have to click on that amount and put 40 and then once I click tab to recalculate QuickBook is actually telling you there’s a difference for $311 so now you have to do what’s called resolve the difference which means add the fee so we’re going to click on resolve the difference and additional line adds in the bottom we’re going to come down here and put – 3.11 and essentially it gives you now a difference of zero and then under category this is where we’re going to put that merchant account fees account or whatever is called in your chart of accounts we’re going to select that and then the pay in this case is stripe or whatever that’s optional and then we click on save so essentially you want to make sure that the the all the invoices are being marked as 100% paid and then that the difference it’s a negative amount which is your credit card fee that you click on Save and then essentially you finish that workflow completely I’m going to show you one more workflow which is to take your billable time billable expenses and convert them into an invoice so I’m going to click on the gear menu and click on subscriptions and billing because I’m currently in The Simple Start version of QuickBooks Online which doesn’t support this specific feature I actually need to be at least on I need to be at least on Essentials and above to be able to do this piece so I’m going to click on change plans so let’s start by going into the new button and then clicking on single time activity so I’m going to create a time sheet item or enter a time activity that I want to Mark billable to the customer so I’m going to select my employee or my contractor that I’m using their time to then create into into a billable invoice I’m going to select let’s say salary item and then under customer I’ll pick customer B and then under service I’ll put here services and then I’ll put here that they worked let’s say 8 hours and 45 minutes and then on the description I can put a support on their issue or something like that you can also click on start start and end times so if you want to put put the times that they actually worked and then have QuickBooks calculate the hours based on that you can you can do that as well so that’s really up to you and how you want to do it and then on under here where it says billable here you put the rate that you want to invoice your client for so in here it tells you hey that was 2 hours and 15 minutes and based on that you’re going to be able to invoice your customer $918 with. 75 keep in mind that this doesn’t automatically invoice your customer it just keeps it pending for you to be able to invoice them later in the future when it’s time to invoice them so I’m going to click on Save and close and then I’m going to go create an invoice for this customer B so I’m going to go to new invoice I’m going to select customer B from the drop- down menu I notice that immediately on the right hand side there’s a drawer that tells me all of the potential transactions I can add to the invoice based on previous billable time so I’m going to click on ADD and essentially once I click on ADD automatically that billable time translates over to the invoice including the description the quantity and the rate so I don’t have to enter it again so that’s how you take billable time and add it to the invoices now notice that there’s a little uh link button here that says linked to a billable time because if you click on that you can actually see the time entry uh by itself so that’s what that’s for so you can actually inspect the transaction or even edit the transaction by itself so let’s go back into the invoice here and then we’re going to click on Save and close now I’m going to show you a really neat feature that you can only have in QuickBooks Online Essentials or up which is called delayed charges or delayed credits so I’m going to start by clicking on the new button and then I’m going to click on a delayed charge so a delay charge is when you want to sort of remind yourself to invoice that customer maybe at the end of the month for a particular service that you provided but you don’t want to create invoice just yet so let’s say for example back in February 1st for customer a we did some work so I’m going to put here under Services I’m going to put 2 hours for $75 an hour and that happened back in February 1st so I’m going to click on save a new and let’s say the next day on February 2nd we did more work for that customer B and we did uh Services let’s say this time around we did 3 hours and 40 3.45 hours at $75 an hour and then we’re going to click on Save and new and let’s say then on Monday the 5th we did some more work for this customer B and we did let’s say only 75 hours uh times $75 an hour and again the purpose of this is that you’re not creating an invoice each time you’re just entering a record in the system that you want to invoice this customer eventually for all of this work okay then I’m going to click on Save and close then let’s say I realize that I’ve overcharged them an hour for whatever reason I can go into to new and do a delayed credit which would be like the opposite of a charge and then I come back into customer B and let’s say I recognize that on the six and I can put uh uh recognizing we overcharged one hour for whatever reason right so we’re going to put quantity one 75 we don’t need to put a negative or anything like that I mean the but by default uh QuickBooks understands that we uh that we’re doing that then we’re going to go ahead and click on save and close and we’re done so now let’s say it’s the end of the month and we want to invoice our customer for all those charges and even the credits against those charges we’re going to go into the new button that we’re going to click on invoice then we’re going to select our customer customer B and then we’re going to notice on the right hand side that we see both the delayed credits delayed charges and also maybe some additional billable time that we did in another exercise so I can click on the filter button and say you know what only show me delayed charges okay and then I click on apply filter and then I can inspect each of these by clicking on the little link if I want to and I can click on ADD and then add and then basically you add each of the lines from the previously entered delay charges I can ex out this filter and then maybe only show the credits and then click on apply filter and then click on ADD and then in this case we didn’t put a negative on the credit transaction itself but quick books enters this one as a negative because that’s what a delayed credit is so then at the end of the day the math is the customer now also $24 and let’s say this happened right at the end of the month February 29th and then we click on save save and close save and send and then we’re done using our delayed credit and delayed charges now I going show you one more thing which is a billable expense I’m going to click on the gear menu and click on subscriptions and Billings and I’m going to upgrade to now the plus Edition I need to be at least in plus to be able to do this specific part which is the uh billable expenses so with QuickBooks Online plus you’re able to assign an expense to a specific customer so then when we Mark that expense billable uh you’ll be able to create an invoice with that specific line item so for example I’m going to go to new and click on expense and let’s say I went to H FedEx so we’ll put here FedEx I’ll create a new vendor and we Shi some documents for a customer that we weren’t supposed to pay for we did it for them anyway but we’re going to ask them to pay us back so under category I’m going to put here uh shipping or something like that if I have any sort of uh shipping account then on the description we’re going to put here overnighted uh documents as per customer let’s say we paid $27.96 and then here’s the key we’re going to click under the check boox that says billable basically uh reminding us that we have to invoice our customer for that and then most importantly we have to select our customer in here so we’re going to select our customer Mary Smith and essentially we’re going to put uh zero markup now you can actually mark up your billable expenses and make some profit in the process but if you don’t intend to market up or make additional income from that all you really need to know do is leave the mark up at zero then we’re going to click on Save and close and then when we go invoice our customer I’m going to click on the new button and then invoice I’m going to select from the drop- down menu go back to my new customer Mary Smith and then down here in the in the right we’re going to see billable expense we click on ADD and as we scroll down we see that the specific text that we had on the description comes in the amount comes in on the drop down menu you’re going to see that bank and that’s kind of on purpose is because this is actually reversing an expense and there’s no product or Services tied to that so this will be the only situation in which you will see uh nothing selected under products and services because this is in fact a billable expense and then that’s it then you you can maybe add some additional services to this if you want to let’s say I’m going to also charge them $75 for like going to FedEx and shipping the document or whatever um you you can add additional services on top of the billable expenses that you’re getting reimbursed for and then you click on Save and close and that finishes that workflow I’m going show you one more thing which is using a journal entry to adjust like an old accounts receivable sort of just to clean up your old accounts receivable now this is more of an advanced technique and maybe only an accounting professional that understands debits credits and what a journal entry is quite frankly are the ones that should be doing this but I’m goingon to show show you regardless because it is part of account receivable Management in one way shape or form so I’m going to go into reports and I’m going to look for the accounts receivable um aging report I’m going to go into accounts receivable aging and then I’m going to notice that I have maybe an old customer here with a $5,000 balance that’s really really old and I want to just make an adjustment and get rid of that $5,000 balance or maybe I want to get rid of half of it or whatever it happens to be so I want to use a journal entry to adjust that balance so the way that will work is we go in the new button then we click on journal entry and as I mentioned again this is more of an advanced technique I’m going to go in the first account and click accounts receivable and accounts receivable is going to be reduced by $5,000 which will be a credit and again this is more of a something accountants would do and then we can put uh writing off old balance or something like that so we come in here and put our our comment writing off all balance and under name we’re going to put our customer’s name we’re going to find our customer here called Old customer and then generally when you write off the old balance you’re going to go against a sales account and income account or if you have something called returns or refunds or something like that you can also do like a income refunds account or sometimes there will be an account called Bat debt or something like that so that that could also be the account so depends how your account is set up it could be a sales account a refunds account a returns account or or a bad debt account those are typically the accounts that we use to write off all balances so we use a journal entry we use the power of debits and credits and double entry accounting to reduce our accounts receivable and at the same time to uh record the expense or the reduction of income which is to reduce um an open invoice so then we click on Save and close and that essentially writes off the balance notice that now old customer has a net balance of zero but now I need to apply that journal entry into that old invoice simply by clicking on the new button and then clicking on uh receive payment it’s a little bit counterintuitive cuz you really never got paid for that but we’re going to use receive payment then we’re going to select our old customer here and then as long as again our invoice is checked and our journal entry is checked and notice this is like an old invoice from 2022 as long as those two things are checked and at the end the amount received is zero so there’s actually no new money coming into the bank we click on Save and close and that will apply that uh journal entry to adjust your account receivable make the open invoice disappear and you essentially will be done with that the very last thing I’ll show you is uh how to create a customer statement that shows you the history of all the invoices and payments you ever had for that specific customer so I’m going to click on the new button then I’m going to go into statement it’s under other so interesting enough it’s not under customer is under other I’m going to go to statement and then I’m going to select which customer I want to see uh sort of a history of statement for so I’m going to select which is the one that I want to uh select then I’m going to click on print or preview that way I get to see the history and then QuickBooks will show me all of the transactions that are open that essentially add up to the $918 so you get to see all the positives and all the negatives that carry over a balance to eventually show you what the ending balance for that customer is if I excit that and I go from instead of clicking on balance forward I click on transaction statement and then click on apply and then I’m going to just select customer B and click on print preview you’re going to see that the statement looks slightly different so depending on what type of statement you want to see you’re going to have a transaction statement statement you’re going to have an open item statement or you’re going to have a balance forward statement and you want to play with each one of these to see which is the one that makes the most sense to you and the one that your customer will understand probably the best you want to uh go through and try all the different type of statements that you have before you make a decision in terms of what’s the actual statement that you want to send to your clients so anyway I hope you enjoy this video on the accounts receivable workflow and how to record income using these workflows make sure you check the description below there’s tons of other videos that talk about other things accounts payable workflow deeper into bank feeds deeper into reports and how to record income without accounts receivable there’s a separate video that explains that in there which skips invoices skips payments it just goes straight into deposits or Bank feeds anyway I hope you enjoyed it and I see you in the next one

By Amjad Izhar
Contact: amjad.izhar@gmail.com
https://amjadizhar.blog

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QuickBooks Online: Mastering Accounts Receivable Workflows

QuickBooks Online Accounts Receivable Workflow Study Guide

Quiz

Quiz Answer Key

Essay Format Questions

Glossary of Key Terms

QuickBooks Online Accounts Receivable Workflow Briefing Document

Frequently Asked Questions: Managing Income with QuickBooks Online Accounts Receivable Workflow

QuickBooks Online: Managing Income Recognition

QuickBooks Online Accounts Receivable Management

QuickBooks Online: Invoicing Customers

QuickBooks Online: Receiving Customer Payments

QuickBooks Online: Recording Bank Deposits

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QuickBooks Online: Mastering Accounts Receivable Workflows

QuickBooks Online Accounts Receivable Workflow Study Guide

Quiz

Quiz Answer Key

Essay Format Questions

Glossary of Key Terms

QuickBooks Online Accounts Receivable Workflow Briefing Document

Frequently Asked Questions: Managing Income with QuickBooks Online Accounts Receivable Workflow

QuickBooks Online: Managing Income Recognition

QuickBooks Online Accounts Receivable Management

QuickBooks Online: Invoicing Customers

QuickBooks Online: Receiving Customer Payments

QuickBooks Online: Recording Bank Deposits

The Original Text

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Discover more from Amjad Izhar Blog

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Jinnah, Partition, and the Creation of Pakistan by Jaswant Singh – Study Notes

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