Payment items and entering payments

Once again, I've screwed up and I need help. (Windows XP Home, QuickBooks Pro 2005.) I have a very secondary line of work which I was (ggratified and) horrified
to see has taken off over the past year. Unfortunately, I didn't take it seriously at the time and didn't create invoices for what were initially minor jobs. My accountant now says I should have raised invoices. I was hoping to create an annual total invoice and show cheques deposited to the business account as partial payments. The cheques were deposited using the "Make Deposits" window, showing the income account for the secondary line of work. If I create an invoice and use payment items to pay down the total over the year, I finish up with twice the actual income. It's been a long day, and I can't make sense of the "Help" screens on this. Does anyone have any advice, please?
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There are several painstaking ways to accomplish your task but I'd question your accountant asking you to go back and do all this work. Be certain he/she wants you to do this for 2005 rather than just backtrack for 2006. Neither of the following two methods will affect your bank reconciliations.
1. Edit all deposits and change the income account to the accounts receivable account, making sure to properly assign the customer/job name. You'll end up with all your payments showing as negatives on your Accounts Receivable reports. The invoice plus the payment credit will either wash out at zero or show a customer balance.
Using this method requires you to then go to Customers>Receive Payments and manually receive all those credits against the invoices in order to get them off your A/R reports.
2. Re-enter your received payments via the Customers>Receive Payments window, temporarily doubling your income. Edit each deposit, select the Payments button, select the customer payment that matches the one on the deposit, after it appears in the Make Deposits window under the original entry you can delete the line of the original entry. This way the reconciled deposit stays the same, you just substituted the payment you created in Receive Payments for the one you originally entered as an income line item.
--
Tara



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scfundogs wrote:

2005, I'm afraid.

This is the point where I get confused about the "Receive payments" - since I set up invoices at the end of the year (not realising I'd need them earlier), I thought that "Payments items" would be the answer, as the payments were received before the invoice date. Can I do this anyway, even if I have a global invoice with a later date?

Same question as above - can I use "Receive Payments" for an invoice dated after all the payments have been received?
[Sorry if these are really stupid questions, I've been staring at the accounts and the "Help" screens and manual for several hours now.]
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You can apply payments to any invoice you wish as long as they're from the same customer, regardless of date.
If I understand you correctly you created one invoice per customer covering a year's worth of billing but have many small payments given at the time services were originally rendered.
If that's right then method 1 would probably be fastest for you. You still have to edit each of those original, cleared, deposits as there's no way around that.
Once all those payments show up under each customer with only the one bulk invoice you'll be ready to clear-out the zero balance customers. That's where you'd go back to Customers>Receive Payments because you have to tell QB that the payment/credit amount showing in A/R should be applied to the invoice of the same amount also showing in A/R.
For the customers with remaining balances you can leave things as they are for now or apply the payment to the invoice and A/R reports will just show the balance due on the invoice.
Good luck!
--
Tara



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scfundogs wrote:

Almost. You can't apply a payment to a future dated invoice, because the invoice hasn't hit the A/R yet. However once the day the invoice is dated has passed then you can apply any payment to it. Happens all the time when a customer overpays and says just put it on my next order.

Remember you need to do this with 2005 dates.

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scfundogs wrote:

...
Thank you - this all worked nicely. However, for anybody tempted to do this, a remaining drawback is that if you deposited more than one cheque, QB won't allow "more than one A/R or A/P" per deposit, so you have to create an artificial deposit, which confuses the bank statement ...
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Its been a long morning so my mind is numb at the moment. I don't understand what you mean by multiple deposits and only one A/R or A/P account. You shouldn't need to create anything with the method I described and neither method should affect your reconciliations.
My hunch is that you made deposits containing multiple payments/checks. When using Customers>Receive Payments to apply payments you should be recording them to Undeposited Funds. That's where they're stored for your use when you edit the original deposit and replace the manual line item going to the income account with the line item, or items, from Receive Payments.
--
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scfundogs wrote:

...
Your hunch is correct - I made (for example) a deposit containing three cheques, two for one customer and the third for another. However, the problem arose before I got to the Customers>Receive Payments stage, when I was editing the (multiple) deposits entries. This is where QB told me I can't enter more than one A/R or A/P per deposit, when I tried to change the account for the second cheque to A/R.
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Okay, I see what you're saying. You chose to just edit deposits to point all payments to the A/R account. I didn't foresee the problem you mention when telling you about that method. The other method, where you (first) re-record all payments received using Receive Payments and placing them in Undeposited Funds, temporarily doubling your income. Then you'd edit each deposit and replace lines in the deposit that go to income with the matching payments sitting in Undeposited Funds.
I apologize for not foreseeing that glitch before. Obviously, when I said this would be a painstaking task, I wasn't exaggerating.
--
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scfundogs wrote: ...

I'll go back and try your method (2) as an exercise, but I don't understand why QB doesn't want more than one A/R or A/P item in that window.
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When you make the payments against the invoice, apply them to Undeposited Funds rather than the Bank account. Open the original deposit, select the replacement payment(s) which correspond to the income originally recorded from the Undeposited Funds list (you may have to click on the Payments button at the top of the Make Deposits window). This should insert the replacement payment (coded to Undeposited Funds account) on the last line(s) of the deposit. Delete the original line (click on the line & use ctrl-delete) to remove it. This should leave you with the invoice payment assigned to the correct deposit & leave the deposit TOTAL unchanged.
Scott out.
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Scott wrote:

I'll experiment with this tomorrow when my head is back on my neck. Thank you.
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Why? If you did not 'bill' the customers, then why do you need to create invoices after the fact? Are you selling inventory items? Are your services subject to sales tax? If not, why invoice?

I'm not sure of the tax requirements in the country/area you are from. If your company is required to use accrual-based accounting, end-of-year invoices will certainly muck up your previous quarters. All income will show as having been posted end-of-year.

Again, why is this a problem?

That's because when you create the invoice, you are entering income transactions. Invoices also increase the value of accounts/recievable (the money that is owed to you).
If you want to use 'post dated' invoices to 'correct' your books, you must change the income account on each deposited check in question to 'accounts receivable', making sure that the customer name is associated with the check. This will create a credit to each customer account. These credits would be applied to any open invoices using the 'Receive Payments' window for EACH customer. NOTE that your accounts recievable balance history WILL BE SKEWED due to the fact that you will be subtracting money owed BEFORE you have created invoices to reflect the balance due.
Note also that in order to change the accounts on the deposited checks, you will most likely have to delete the old deposit and re-enter. This means re-reconcilling your bank statements in turn.
If your accountant is insistant (for whatever reasons) that individual sales be recorded, may I suggest you look into using sales receipts? This will not necessarily reduce the work you have ahead of you; you will still need to enter the sales, and the sales will be entered individually, as opposed to one end-of-year record per customer - and the issues involving editing the bank deposits will still exist - BUT the income activity and accounts receivable history will be unaffected. You will also have eliminated the need to 'Recieve Payments' for each customer after entering your changes.
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Lisa C wrote:

We're an S corporation, and the accountant said that services (not subject to sales tax) supplied through the corporation should have invoices attached. To be specific, I sing, and last year this took off, resulting in a bunch of 1099s.

Because they were deposited before I created the end-of-year global invoices for each client.

It's only 5% or so of total sales, and I typically get a cheque before or directly after every job, so A/R wasn't a serious problem (and this year I'm handling it differently).

You're absolutely right. Fortunately, I got away with it this past year, as I didn't reconcile the business account until now. (Something else I'm changing.)

I'm raising invoices for the services as the clients cut the cheques, so there's no further problem.
Thank you for the help!
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It shouldn't mean either. I often go back and change accounts on reconciled deposits without a problem. The deposit isn't changing, only the account its associated with, therefore the change has nothing to do wtih the reconciliation.
--
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scfundogs wrote:

It only became a (potential) problem when I (apparently) had to create separate deposits for the cheques, instead of the original multiple ("split") deposit.
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If I understood the OP correctly, he used the Make Deposits window to enter the deposits. The make deposits window forces you to delete any deposits associated before you can edit.
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