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Deposit invoice example for Quality Assurance

all right good afternoon everybody thanks for joining us today we are going to be talking about customer deposits today i know i put this under the job costing category because people think about construction they think about down payments they think about i'm in the trades industry i do hvac installation or maybe servicing and so i'm going to take a down payment from a customer on the work we're about to do so i put in your job costing but it's not always job costing we have a lot of clients that have customers put down deposits in the manufacturing industry as an example especially in custom build right so build to stock type of things we've got clients who do custom trailers and clients that do furniture even though it's not custom but still furniture because they don't build until the order is placed we have people who do custom car seat covers i just thought i had jewelry custom jewelry um so you can see where the deposits can come into play even around inventory so it's not just construction basically right not just construction so anyway so we're going to talk about some of these things today i'm marjorie adams i'm the ceo for lane i love doing these trainings every week please definitely let us know if you have any questions pop it in there if i can't get to your questions i will get to them after our meeting we'll reply to you after today if you have any ideas for trainings of things that you guys want to see please let me know as well uh so let's go ahead and get started um i always like to excuse me i always like to remind everybody we do have a youtube channel youtube.com four lane if i go too fast today you want to go back and watch it in a slower pace or pause it while you do these things live in your file you can do that on our youtube channel our videos are usually up the next day also we have a four lane quickbooks enterprise facebook group every time i mention this about four or five people join into the facebook group and start asking questions so it's just a resource um good to know and then we have had a lot of clients asking us lately um they're getting super annoyed with intuit support we do have on-demand support here at four-lane um so you know when you have an i.t company you don't call microsoft you call your i.t person so we are basically your i.t person for quickbooks um also what's really great about this and where people take advantage is a lot of times one person at an organization becomes like a vit person for quickbooks so it's the cfo the accounting manager something like that the office manager and everybody goes to them well you can free up some of um that person's time and send them to us instead so anyway just wanted to make sure y'all are aware okay i'm not gonna be spending a lot of time in our slide deck today but i always like to leave these up so you guys can see what we're going to be talking about so first we're going to talk about customer deposits obviously but the biggest thing that i want to make sure that we touch on is there's two different ways to do this so one is we have a negative accounts receivable okay so that's one way to do it so we'll look at what that looks like the other way which is the correct accounting way let's be clear is an other current liability okay so that's how they come in because really if i take a down payment and say we're doing a remodel on my kitchen if i make a down payment to the remodeler on that who's doing my kitchen and they never start work they technically owe me that money back right now they haven't started work yet so they shouldn't unless they're cash basis they shouldn't be recognizing that revenue on their p l at the point that they're receiving the cash so where is it going to go it's either going to go in as right it's cash in so a debit to cash and a credit to either accounts receivable which would be a negative ar or a credit to a current liability account which would be a positive uh in the ap section right or in the current liability section okay let's take a look in product uh what this looks like oh i also wanted to just before i go ahead i put these little screenshots in here it's really hard to show the stuff in demos or in webinars because um it's linked to an actual right this is an actual merchant service account so if you guys haven't seen the what's new in 2022 quickbooks always likes to make it easier for you to get paid right if we make it easier for our customers to pay us then they will pay us faster quickbooks also likes to make it where your customers do the data entry for you if possible and so this new concept of payment links came out if you have a merchant service account you can do this and what the payment link is is you can send without creating a transaction even you don't have that estimate you don't have to have anything in the system without creating a transaction you can send a link to the customer you go in there you say hey i want to build this customer a hundred dollars what's it for you just put in some words in there right it doesn't have to be tied to an item not tied to a transaction you do choose which customer and which email address you're going to be sending it to and then you choose if they're allowed to pay you by credit card or bank transfer once you do that it creates a link you can use that link you can email it you can text it you can i don't know i don't know how other ways you can get it across but you can give it to the customer the customer clicks on that link they put in their own credit card or ach information they do the data entry for us which is awesome because then it's stored online right and they have access to next time they make a payment to us it's stored there and intuit servers no pci compliance issues with us and they did the data entry for you and it results in what we're about to look at when we dive in product here which is a customer payment so pretty cool stuff if you haven't seen it i love this feature okay so let's get in product where we like to spend the most of our time i'm going to go through this as if you're doing an estimate okay so i'm going to start with an estimate in here now you don't have to start with an estimate you can just go and create a payment link right so the payment links are here under customers you click on payment links you have to make sure your merchant service account is linked to your quickbooks account can't do that in a sample file and then you just send it out to the customer right excuse me sorry so i'm going to start with an estimate um just so that we can see the workflow that is possible maybe you would do it this way we're very good at being creative over here at four lane using the system to get to the results we're wanting to get to right so we go into estimates here and i'm going to create an estimate for kitchen remodel one okay so just create a new estimate here now with our estimates in the system you don't have to create them this way you can just go straight to deposit i have a lot of clients that actually sell things like they will sell a subscription a sas or a sas organization that also rents product to their customers so like cell phones we have some high powered cell phones that go out in the middle of the desert i guess i don't know that much about the technology of it but they they the service is a sas service or it's a it's a subscription service for the usage of the phones but they also rent the phones out and so they take a deposit against that rental of phones or against the destruction of phones or whatever it is so you see it in all different places so anyway just i'm getting keep on going that this i don't want people to think oh job costing i'm out because i'm a manufacturing company it's not the case we see this all the time so i'm gonna put in here a couple items right so excavation and concrete work i have an estimate of 500 i have uh or i'm sorry let me put in here uh 100 times 50 and 200 times 75 and have a markup of 120 on this one which would be awesome to have that mark up 75 on that one okay so i saved this estimate right it's an estimate it's just what we're used to seeing it has nothing it does do job costing for us if you watch our video our previous video around job costing last couple weeks ago but what it does is it helps us to see what we're going to send out to the customer hey customer this is how much you owe us 37 250. so the other thing that we do is we can come in and we can set up an item so i'm going to go ahead and set up a new item now i like to make these items other charge items when they're deposits and it's just because you know the item type matters obviously if it's an inventory part or an inventory assembly it matters you have to choose one of those so that you get the field that allows you to post to the balance sheet when you purchase it service items non-inventory parts other charge items they kind of have a very similar feel on in the books inside of quickbooks it's just that when you are totaling by right you can total by item type and so i like to kind of stick things together so i put in as an other charge because it's not a non-inventory part and it's not a service charge right so that's what i usually choose now i'm usually telling everyone always when you set up an item in quickbooks you always make it double-sided by checking this box okay now this is the one time when i choose not to do that i'm sorry i've also seen people set these up as discount items i also don't like that because it makes it implies to me that it's a discount to the customer and this is not this is money that the customer owes us like they're not receiving a discount here so so this is the one time when you cannot do this as a double-sided item and here's why when i set up a double-sided item usually i like to do it so that because on a customer deposit i should never see it on a purchase type transaction right only on on a customer type transaction so i usually say come in here stick it to a a place oops stick it to a place where i will really be able to see if anybody accidentally posts to a customer deposit on a purchase transaction that's usually my rule of thumb however when you make it a double-sided transaction one of the things it does is it doesn't allow you to put in a percentage in the sales price and i like to put in a percentage in this because it just helps right usually we've got sales reps or pms you know doing this information put this information in here and i like them to not have to think so i'm going to call this pre-pigment okay um or retainer or something retainer payment you could call it whatever customer bought whatever it is but notice since i don't have it double-sided it says now i can do an amount or a percentage so i can come in and put in here 25 okay now the benefit of doing that is that it auto calculates for us it's just a default when i put it on the actual transaction i may or may not do 25 maybe it's a negotiating thing now i can 25 is the standard but i can go lower but the fact that i can put in a percentage is helpful you know helps people not have to think about what they're doing so try to get try to get to the point where our system is telling us what what to do versus us having to think about it as much as possible so then where am i going to point this towards right i'm going to point this prepayment item towards a customer deposit account that's the right way to set this up okay now we're going to be talking about negative ar first so really this item is never going to come to fruition never going to show up on an invoice but i like to have it even if we're not doing it through customer deposits as a liability i like to have it so that i can reflect to the customer how much money they owe us as a prepayment now whenever i put in something that has a percentage it's going to take a percentage of the line above it right so this is actually taking a percentage of the line above which is 26 000. now i wanted to take a percentage of both so what you actually have to do is insert a line and you have to use a subtotal item a subtotal item inside the enterprise is a really cool powerful thing you can subtotal amount quantity you can subtotal other columns basically any other columns that have numbers in them there's also a multiplier thing which if you haven't seen that video from us we'll it's in our youtube channel but it's really neat like you can say you know you can do weight as an example right so i could add a field called weight and it'll take quantity times whatever one unit of weight is and give me it multiplied out anyway i don't want to get away from this too much so here i put a subtotal item now it totals up to 37 250 so it's taking 25 percent of the line above it right um which tells me what my my prepayment is again this is all just for customers to see you don't have to do all of these steps i'm just giving you bits and pieces like this seems like a lot we're 15 minutes in and we haven't even received a payment yet but it's just ideas right get your brain jogging to think about what's possible okay so i save this estimate i send it out to the client and i just say hey this is the prepayment or this is the deposit or this is whatever we call it whatever terminology we use you owe us 93 1250 in order for us to get you on the schedule now when we use a prepayment link or when we are doing the negative ar usually that is when the timing of the prepayment to the application or when we're going to actually get the work done is in a pretty short time frame okay so the negative accounts receivable to me is usually okay when it's a couple days or within a week if it's outside of that time period then we might have some issues around timing right so we'll look at what that means so if i sent if i came in here and sent a payment link or if the client just called and said hey i'm ready to make the payment for that 93 1250 the result would be if we're doing negative ar i receive payment transaction okay so i'm coming in here i'm saying i'm receiving a payment against kitchen one now normally when we receive a payment we have a transaction down here but so far we don't have any posted transactions we don't have any invoices for this customer so instead i have to take 93 1250 and pull it onto this payment here's the date here's the you know i can take a credit card payment over the phone ach over the phone if i have that set up i can get a check so notice that once i put in that amount down here it says hey you are doing an overpayment what would you like to do with this you can leave the credit to be used later which is what we want to choose to do or you can refund the amount to the customer which is not what we want to do because they're paying us why would we pay them right back all right if i say save on this oh let me change the date it's [Applause] uh otherwise i'll keep getting these pop-ups okay so now on that transaction what happens behind the scenes right so we can always go to reports and down to transaction journal and see what's happening behind the scenes so it's hitting undeposited funds cash right whatever if we go through on deposit funds and it's hitting accounts receivable as a credit which is a negative accounts receivable if i go look at my uh ara gene summary report i have a negative 931 250 on here okay so it takes away from if i go look at my balance sheet hopefully my balance sheet 41 125 should tie to my ar aging which includes that negative amount but we have some clients who receive final payment at the point of invoicing all right so when they invoice the customer for the from the estimate they invoice for 100 they receive final payment at that point as well and so the only thing sitting in their balance sheet or in their ar is actually negative amounts the their entire ar is negative and and that's okay as long as when you send your books to your cpa the cpa understands for tax adjustments they need to adjust out of ar and they'll put it into a current liability for tax purposes but this way is very simple it doesn't take a lot of extra steps there's no extra reconciliation to do so a lot of people do choose to do it this way so once i have that in here let's go back to our estimate okay we're going to finish out our job and i'm just going to create invoice for 100 okay now when i create this invoice for 100 i'm going to remove that prepayment line and when i say save notice it pops up a box i know we get super annoyed by all these pop-ups but we should pay attention to them every once in a while when i save this customer has available credits would you like to apply them to this invoice and i can say yes and then it pops up and there's that payment for me sitting waiting to apply to the payment now i see this a lot of times too in web stores we'll see people the payments come in from the web store right and they sit in there as a negative ar until we take the sales order and mark it as an invoice so i've seen that tons of times too lots of lots of workflow that way because there is a time difference right customer pays me today for an order but i don't ship it until two days later so there's a time difference there so when i say save here notice you can see down below 37 250 is what they owe me payments applied 9 312. so this is the balance due and then we can send that out to the customer or we can take payment or whatever it is right right now so that's negative ar that's running through negative ar customer deposit the other way to do this is to run it as a current liability now the current liability is the most effective way is the proper accounting way not the most effective is the proper accounting way because you really shouldn't have it the only thing that would be a negative ar that should be on your books is like you know bad debt a contrabad debt account allowance for bad debt right that's the only thing that should be showing up as a negative in the ar world otherwise it should be positive so what does this look like let's go ahead and create an estimate let me get to that estimate again i'm going to create a copy of it i'm going to change up the amounts here just so that way it really stands out as a different amount okay now you can do multiple prepayments if you want to on here you can do several like i could do prepayment one two three four five i've seen people do it that way and then you put in here the dates that they're due right uh prepayment due so it's again it's just paperwork provided to the client so once we have the estimate in the system we save this there's two different ways that i have customers go and get that prepayment the first way is that they will actually create the invoice and they'll choose for only selected items we'll create the invoice for um actually i don't do it that way i'm sorry create the invoice for 100 and then when it comes through we change the amount on the prepayment to positive right and then we just delete these other lines so i'm sending the invoice out to the customer for this twelve thousand six hundred dollars okay and that's a little bit easier because it keeps track right when it comes across it tells me twelve thousand six hundred dollars and then i just have to remove the negative so i see this a lot of times other things that people do is that they will record this transaction other things that people do is that they will go in and uh they will create just a sales receipt so they'll use this estimate give it to the customer maybe create a payment link or whatever it is give to the customer and then they will go into sales receipts and say okay i have a sales receipt or you know i'm going to take your payment over the phone um where's my remodel is that the right one which one did i do it too why am i lost albert cruz kitchen remodel one albert cruz kitchen remodel okay so something's messed up in my customers my poor demo files get so abused right um but that's right even though it's looking like it's under heather campbell that's really strange awesome i'll have to look at what's going on there um so on this item i will go in and put in the prepayment and i'll put it in for the 12 600 process ach process or credit card payment so either way okay so either way somehow i am receiving this money once the receipt sales receipt goes in there what happens is behind the scenes it actually hits our let me go to our balance sheet and look it is going to hit our customer deposit account that we have set up right so in here i see i have a sales receipt for alba cruz for 12 600 so it made my customer deposit credit go up which is adding to the balance right took it from 27 500 to 40 100 because it credited this amount all right now coming back to the estimate there's this is a great way to do this too because it allows us to allocate the prepayment against a portion of the estimate so let's say i come in here and i create my invoice and i'm going to create my invoice for 40 of the estimate okay so everything's 40 now notice when it does at 40 it also picks up 40 of that prepayment so it pulls 40 of the prepayment out let's say this is at the end of the month for 12 31 pulls out 40 of that prepayment out and the rest is going to be sitting in the balance sheet okay so when i go in this is a report that we should run so pay attention to this one all balance sheet items if you do not have a subledger documentation for your balance sheet you need to get it right we need to create it for you we need to help you to create it on accounts like customer deposits this is not a bank account it's not a mastercard account where we get a statement or a bank account where we get a statement right it it is just an account that we have where we're looking for something to come into this account sit there for a little bit and then get removed so anything like that we should be reconciling to xero every month and then we should use this report which would be a custom transaction detail report as substantiation for what that balance is so i'm going to run this report for all time so i want everything i want to total by customer and that that'll total my job for me as well and then i'm going to filter for my customer deposit account now if i just filter for customer deposit account it will give me now i'm doing it for all time right and there might be some stuff dated in the future here so that's why it wouldn't tie out to the balance sheet so let's just run it through 12 31 20 26 i think is what my demo file is 38 8 72 50 and look at the balance sheet 38 8 70 250 great but this is running it for all time for every transaction that's ever hit this account right and what we want to do is we want to run it for just what is adding to that balance okay i'm going to run for all time i'm going to filter it not just for customer deposit account but i'm also going to filter it for cleared status of no so i want to say okay which ones of these are on my balance sheet that have not been cleared yet okay and when i go to my balance sheet and i run this for all time and i look at my deposit account 27.060 this report well let's see why it doesn't tie out 27.060 for all time balance sheet customer positives i of course gonna have to figure out why um so as of as probably something dated away in the future a 131 everything matters dates matter 2027. see if that ties out 27 no why is it not tied out today today so we have 25 000. there's the 30. i'm gonna have to figure out why of course i did this earlier in it and it worked out just fine i'm not figure out why these two don't balance out my guess is it's something hitting the balance sheet account that is not tied um through the item so i i will figure that out uh okay it's good it's got me stumped for a second here so one of the things uh that we want to do so i created my invoice i have this amount i saved it right here's this invoice in here now i can go back to my customer to my estimates pull up that estimate that we had and i can create an invoice for the remaining amount okay and put it to a uh the end of january now because i'm putting in the proper period we're getting revenue at the at the proper period what did i just do man i feel like this demo file is really working me over right now okay let's try go slower okay here's our estimate estimate estimate create an invoice create an invoice for the remaining amount there we go and we hit save all right now i'm gonna go in and reconcile this account right so we talked about customer deposits it needs to be reconciled always reconcile it to zero so when i come in to reconcile this account i can sort by right who the payee is who the job is and i see my remodel for 12 600 and then i see on this side my two remodels for 12 600 this is why this is what's throwing it off as this bill is being put to customer deposits so let me let me uh just move this out of here because this is not the correct way to do this right why would we put a bill to customer deposits this is great because it it allowed me to catch it but that's why it was off so i come in here i reconcile these off because it's offsetting right i say we put in 12 600 we remove 12 600 from this account i can say reconcile now what's left when i go to reconcile again is that those ones that are just not reconciled right so it'll only leave me with the couple that are not reconciled in there and then when i look at my balance sheet 27 500 and i look at that custom transaction detail i'm left with just the two transactions that add up to that amount okay so this is a more proper way to do customer deposits all right i know i went through really fast i want to get you guys out of here on time though so let me come back in here just so you know what's coming up in courses i gotta take that off so we have some work in process coming up some web agility courses coming up really cool even if you don't have an e-commerce store still watch these videos because of these webinars because you can use the technology that's available to do some neat stuff with inventory all right guys that's all i got for you thanks so much for your time today we'll see you next week