In using Quick books for invoicing customers, we currently invoice the customer for 50% down and at the end of the job collect the remaining balance. Currently we create an invoice for the 50% and then at the appropriate time create the second invoice. This doesn't seem correct to me. Can I get some input concerning other methods? Thanks for your help.
I will have to ask my secretary later today, but I believe we create a ESTIMATE, and then do partial payment invoices from that for such things as progress payments or deposits. There are a ton of templates you need to sort through to find the one that shows the info you need on your invoice.
I do estimate first as well...BUT then if i get a downpayment, I will create an invoice then at the end of the job create another final invoice. If i dont make the first invoice then i have nothing to record the payment into.
I am only using Quicken..simple as it gets.
But i am just a one man shop.
I've thought about doing one invoice with applied payments, but the larger contractors don't like it, and I think it would be hard to make clear how much you were asking for. Plus, what do you do when there is a change order?
I do separate invoices from an estimate, but the tricky part is applying the sales tax so it comes out properly in the reports. If you are lucky you live in a state where you don't have to deal with a sales tax board.
I don't think many woodworking or related businesses would pass the test of a cash accounting basis according to IRS guidelines...
Regardless, I guess I don't understand how QB books sales or tracks costs if you can make two "invoices", each for half (or whatever fraction) of the job price. I guess I can see it if you are doing "Job A - $10,000" and splitting it up into two payments, but the accounting would be a bit cumbersome, as noted above (according to accrual basis, revenue is generated upon invoice) and I still don't see how you would be able to track job costs by invoice.
But what if you're selling 10) Item A, 20) Item B, and 100) Item C? How do you remove them from inventory, and book the cost of goods sold against the "Invoice"? Do you just always refer to the Estimate or Quote or whatever you initially generate? Seems odd to have an invoice without actual items on it. But maybe I'm just old school.
With our system we just put a note on the order "X amount due as deposit to confirm order", and the payment is entered into cash receipts and applied to the order as a deposit. The invoice (generated when the order is complete) is still for the full amount, but it shows the deposit and balance due.
On the one or two occasions where someone has insisted on a document that says "Invoice" on it, we've created an item we can "sell" called Deposit. It's set up with the proper GL accounts so that the A/R transactions don't affect sales, and the payment gets applied to the actual order. It's a bit more work than our standard method, but it works.
Once you create an invoice then you're placing that amount as not only income but also you become responsible for the sales tax at that time. We might receive deposit checks several months before we do any work on that project, but by invoicing it you would be responsible anyway. Even worse would be if you create an invoice for a deposit in December but don't build the job until after the new year. Then that money shows up as income without any expenses. I click the receive payment button without an invoice, enter the amount, Quickbooks will ask if you want to print a credit memo, then the customer has a receipt. When we build the job I create an invoice and then click the apply credits button.
We have an account called "Customer Downpayments." It's a liability account. For downpayments we create a line on an invoice using this account, and all the customer would see is, for example, "Downpayment on Kitchen cabinets," "$5000.") Progress payments, if used, are down the same. At the final invoice, we would have a line item of the quoted amount. For example, "Kitchen Cabinets", "$10,000." Then a line for any down/progress payment, showing a negative number. That line backs the amount out of the Customer Downpayments liability account. This way, the customer sees the total price and all payments. And accounting comes out correct.
If we do a retainer, which is noted on the quote as non-refundable, we usually still handle it the same way. We would just not ever give it back. Never had an issue though.
Ranliker is correct. In QuickBooks, do a search for "Recording an upfront deposit or retainer as a liability" and it will walk you through it. This will give you the most accurate view of your financials. I never liked having a deposit sitting in my account for work I hadn't done yet. Gave me a false sense of security.
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