Do you have customers that pay a deposit when an order is placed? QuickBooks Enterprise 2024 now allows you to apply prepayments to sales orders.
Enabling the New Feature
When you open a Sales Order in QuickBooks Enterprise 2024, you will see a new option in the icon bar: Receive Payments.
When you select this option for the first time, a message will appear with setup instructions. This is a one-time setup.
Select “Go to Preferences” from the popup window shown above. You may also use the QuickBooks menu at the top, select Edit > Preferences. You will now see a new feature in the payments section: PREPAYMENTS.
Click on the “Prepayment settings” button to begin the setup.
The Customer prepayments window (shown below) will now open.
There are two steps to setup Prepayments on Sales Orders:
- Check the box to Turn on prepayments
- Select an other current liability account to record the prepayments.
You can create a new account by using the <Add New> feature from the dropdown list (shown above) and name it anything you like. Customer Deposits or Customer Prepayments are good choices.
That’s it. That’s the entire setup process!
The new other current liability account will now show on the balance sheet. Sales Orders do not record revenue and no revenue will be shown on the Profit & Loss Statement.
Receive Prepayments on Sales Orders
Once this feature is setup, QuickBooks will automatically handle all the accounting.
When a Sales Order is created, it will move the prepayment into the liability account.
When a new Invoice is created from the Sales Order and you apply the prepayment, QuickBooks will automatically move the funds out of the liability account.
New reports are also available for this feature.
The Workflow
Please note, this assumes the setup process (shown above) has been completed.
Receiving Prepayments on Sales Orders
First, open a Sales Order and click on the Receive Payments icon at the top right.
The Customer Payment window (shown below) will open. Sales Orders will now appear on this screen. The box to the left of “Prepayment on sales order” must be checked.
Enter a payment as normal.
When this payment is saved, QuickBooks will make the following entry:
Debit: Undeposited Funds Credit: Customer Prepayments
No entry is made to accounts receivable.
Apply the Payment to an Invoice
When you are ready to create an invoice and apply the prepayment, the process is simple.
Open a new invoice. Select the customer or job name.
The Available Sales Orders window will open. Select the applicable Sales Order, then click Ok.
You will NOT see the prepayment amount at the bottom of the invoice yet.
Save the invoice.
When you save the invoice, you will get a popup message to apply the credit / prepayment amount.
The Invoice footer now shows the prepayment applied and the balance due.
QuickBooks moves the prepayment out of the liability account by automatically creating two journal entries.
The journal entries clear the prepayment account and move the customer credit to accounts receivable.
The balance sheet below shows $500 from the prepayment in the undeposited funds account. The invoice was for $1,000 but the credit was for $500. The A/R balance is now only $500. Notice Net Income is $1,000 (the amount of the invoice).
New Print Features
New footer options are available for Sales Orders:
- Prepayments
- Balance Due
These can be selected to print. You can customize the form in the formatting section.
- Select the Formatting tab at the top of the Sales Order
- Select Customize Data Layout
- Select the Footer tab
- Place a checkmark in the Print Column for Prepayments and Balance Due.
New Reports for Prepayments
There are two new reports available for customer prepayments:
- Open Prepayments by Customer
- Open Sales Orders by Customer
Open Prepayments by Customer is found in Reports > Customers & Receivables.
Open Sales Orders by Customer is found in Reports > Sales.
Additional Information
QuickBooks support has a great video on this new feature. It can be found here.
Need to create an invoice from multiple Sales Orders? Learn how here.
New Update: Prepayments on Estimates
QuickBooks Enterprise 24.0 (R7) was released on June 13, 2024. This now allows customer prepayments on Estimates in addition to Sales Orders.
About the Blogger
Tim Plue
I am an Advanced Certified QuickBooks ProAdvisor. I have taught QuickBooks and Bookkeeping classes for over 12 years. I help small business owners run their business with QuickBooks. I can meet you onsite or remotely.