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Do you ever receive customer prepayments? Do you know all the important steps to this process? Did you know that there are two ways to record them? My brand new eBook, "Insider Secrets to Customer Prepayments in QuickBooks," will teach you how to handle them:
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Customer Prepayments - Know the Steps
If you ever receive customer prepayments in QuickBooks, you need to know how to record them. Did you know that there are two different ways you can do it?
This is the "traditional" way of recording prepayments. This method uses an Other Current Liability Account to hold the funds. It's the method described in the interal QuickBooks help of the program. I add some more detail and try to make it easier to understand. I also describe the financial statement impact at each step.
1. Set up QuickBooks correctly for this method: set up your Item, set up your account in the chart of accounts, and set up your sales receipt.
2. Receive the prepayment.
3. Determine client retainer balances.
4. Move the retainer to revenue.
5. What happens to the financial statements at each step? I'll show you.
6. Handling refunds with Method #1.
This is my own unique method for recording customer prepayments. No special setup is necessary. You can use QuickBooks as you normally do. This method is NOT described in the internal QuickBooks help of the program.
1. Record the prepayment using screens you are already familiar with.
2. Determine client prepayment balances.
3. Move the prepayment to revenue when you invoice the client.
4. Year-end journal entries needed for this method.
5. What happens to the financial statements with this method? I'll show you.
6. Handling refunds with Method #2.
Tracking Vendor Costs Against the Prepayment
Do you need to keep track of your vendor costs for customer prepayments? It's best to use QuickBooks Premier for this, because Premier allows you to convert an Estimate or Sales Order to a Vendor Purchase Order, a necessary step.
Also, "inventory items" don't allow you to track the vendor costs as you go along. This is because the costs for these types of items are not recorded until the sale is recorded. Other types of items may be used in order to track vendor costs against customer prepayments.
Need more help with customer prepayments? Click here to download my brand new ebook, "Insider Secrets to Customer Prepayments in QuickBooks"...
To your happiness!
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