QuickBooks Payments: The Accounts Receivable Cheat Sheet – Part II
If you haven’t yet read our post on the basics of the customer payments window, I’d recommend checking that out first to get a foundation for these tips. In this post, we’ll delve into a few more advanced topics that we didn’t have room for in the last post: Discounts and Credits, Bounced Checks, and Refunds.
How Do I Apply a Discount or Credit in QuickBooks Desktop?
1. Receive Payments from Customers
2. Set Up Your Customer Discounts And Credits to Apply to Invoices
How to Apply a Discount in QuickBooks Desktop
The Discounts and Credits button allows us to apply either discounts or credits to invoices. The difference between them is credits come from some other transaction, often another payment or a credit memo that has caused an unapplied credit value in the customer’s A/R, which is then tied to an invoice to reduce the amount owed.
A discount is a write-off of some of what the customer owes on an invoice, created at the time of payment. This may be suggested automatically by QuickBooks, based on the terms you have with the customer.
The first tab in this window is for discounts. At the top of the window, we can see some basic information about the invoice we have selected, including:
- the customer
- the invoice number
- the date
- the amount
- the amount due
- current discounts and credits applied
- the remaining balance due
Take note that only one discount can be applied per invoice and payment. If you need to apply another discount going to a separate account, you may want to consider putting that discount on the invoice as an item or splitting the discount off to another payment. Check with your accountant to see what works best for you.
In the lower half of this window, we can see the terms of the invoice, as well as QuickBooks’ suggested discount based on the terms, if any. We can do the following:
- select the amount of the discount
- the account we are writing this discount off to
- the discount class.
How to Apply a Credit to a Customer Invoice
The amount and the account are required if adding a discount; the class is optional, depending on if and how your business is using the class-tracking features.
The credits window has all the same header information at the top of the screen as we see on the discount screen, but the lower half is significantly different.
In the top list we see all available credits for this customer that have yet to be applied. The lower list shows existing credits already applied and saved. Check off the credit or credits you want to use, and QuickBooks will typically try to fill in the amount used automatically. If you need to use only a part of a credit, you can change the amount used manually.
How Must I Record a Bounced Check?
1. Remain in the Receive Payments Window
2. Look to ‘Record Bounced Check,’ Making Sure It’s Enabled
This button on the payments toolbar allows us to record a bounced check, one that your bank returned as unpayable, which marks the invoice as unpaid again; that lets you create another invoice recording any applicable bank fees and additional any service fees you charge the customer for this inconvenience. It will be greyed out on an unsaved invoice, or one that was paid with a non-check payment method.
If the payment in question has not yet been deposited in QuickBooks, it must be deposited before it can be recorded as a bounced check.
Bounced Check Considerations
If the payment has been deposited, then you’ll see the first of two screens for recording the bounced check. You’ll be able to enter the following: the amount the bank charged you for the bounced check: the date; the expense account for “BANK FEE”; and the class, if you’re using it.
Below that is where you can enter any fees you are charging your customer for this bounced check. This should be the total of the bank fees plus any penalty fees you wish to charge the customer.
The next screen allows you to review what the effects of marking this check as bounced will be, and to go back and make changes if needed before finalizing. After clicking finish, QuickBooks will disassociate the payment from the invoice, marking it unpaid, and will create three transactions.
1. A journal entry that removes the amount of the payment from the bank account it was deposited to and increases Accounts Receivable for the customer by the amount of the bounced check. QuickBooks ties this journal entry to the payment to zero it out while still reflecting the details of what happened.
2. A second journal entry will be created that increases the expense account you chose for the bank fees by the amount of the fee and removes that amount from the account the deposit went to.
3. An invoice for the total fee you’re charging the customer. QuickBooks should create a default Other Charge item for this called “Bounce Check Charge”, which will go to an account called “Returned Check Charges”. The account on this item can be changed if need be, but if you rename it, next time QuickBooks will create another new charge with the default name, so it’s usually best to leave it be.
How Must I Address Overpayments and Underpayments?
1. Begin With the Refund Process
In the case of an overpayment, QuickBooks will let you choose to either leave the extra as a credit to be applied to another invoice in the future, or to refund the difference to the customer.
2. QuickBooks Desktop Will Respond According to the Actions Taken on a Refund
If you are issuing a refund for an overpayment, you’ll see this window pop up after saving the payment. It will look a little different depending on how you’re issuing the refund.
- For a check or cash payment type, you’ll need to select the account that the refund is coming from and will see its ending balance below the account selection.
- For credit card refunds, you won’t be selecting an account, as the refund is issued via a credit to the customer’s card. What you will see is a checkbox asking whether you are processing this refund online, possible if you have signed up for Intuit’s credit card processing services.
When you save this, QuickBooks will create a transaction to record the refund.
- If issued via a cash or check payment type, it will create a check from the selected account against the customer’s accounts receivable balance.
- For a credit card refund, it will create a transaction of its own type, which serves the same purpose and if viewed later will look pretty much like the refund form.
Other Refund Considerations in QuickBooks Desktop
Refunds can also be issued from a credit memo in much the same way. With a credit memo open, selecting “Use credit to give refund” will open the refund window we saw above, and the process is the same from there.
There’s certainly more we could cover. Even here at ebs, we’re learning new things about QuickBooks every day. But, in the interests of time we’ll stop here for now.
Review these procedures, see how they might apply to the way your business uses QuickBooks, and give them a try in a sample file.
You may not need to do these things often, but when the situations arise you’ll be glad you already know how to record them properly.
If complications or issues arise, when doing these steps or wanting clarification, let us know!
Thanks for reading and have a great day.
