Previous lessons have focused on setting-up Sales Settings (in our lesson titled 'Customers') and examining the Customer Center, now it's time to start adding income transactions to QuickBooks Online (QBO), so we want to look at some of the common workflows used to track sales.
When you’re training to use QBO properly, it's important to take time to determine how you track your sales. Do you use Accounts Receivable? Are your jobs paid at the time of service? It's important that each QuickBooks user understand the QBO features most appropriate for them to use, and those functions providing the level of detail they need in their reporting, in this case their sales and income reporting.
These are the three typical Customer Workflows used by most businesses:
1. Do your Customers pay at the time of service?
- Sales Receipt > Bank Deposit.
2. Do your Customers pay later, make multiple payments, or pay several invoices at once?
- Invoice > Payment(s) > Bank Deposit.
3. Do you make Estimates & Bids?
- Estimate > Progress Invoicing > Payment > Bank Deposit.
Notice that the last step of each is to make the Bank Deposit. That’s where cash and checks get combined when taken to the bank, or the merchant services company batches the credit card and ACH payments for the day. These totals must MATCH the Banking Feed.
This is where most problems within QBO crop-up. Business owners don’t know to go to +New > Bank Deposit. Instead, they add Deposits from Banking. QuickBooks Users should always remember, Do not “Add” Deposits through the Banking Feed, if you do, you will duplicate your Income! Always MATCH them instead.
PEBCAK! As a best practice, deposit all customer payments to Undeposited Funds, so that the Banking Feed will find the transactions, and you can easily fix workflow errors.
Creating Sales Receipts
Create a Sales Receipt when the business is paid immediately for products and services.
If the company has already received the money and is recording the sale after the fact, this saves a step over the two-step process of creating an Invoice with a Payment. Both steps happen on this one screen.
From the +New button select Sales Receipt.
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Select +New > Sales Receipt.
The Sales Receipt form opens.
For businesses with a Point-of-Sale system or online sales, create one daily Sales Receipt to gather all the sales for the day in one step.
Enter the Sales Information, including Date, Product/Service, Description, Quantity, and Rate.
Make sure the appropriate line items are marked as Taxable.
If you have Discounts, Deposits, and Shipping turned on, include those amounts as needed.
After the transaction is entered and the Total confirmed, choose the Payment Method. If the transaction will post by itself to the bank with this exact amount, Deposit to can be the name of that bank account. This works well if the business owner is depositing checks using their bank’s smartphone app.
Illustrates the 'Deposit to' Account Setting (shown in red box) of the Sale Receipt window within QuickBooks Online.
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Otherwise, use Undeposited Funds, so that this amount will be listed with other sales that day. At the end of the day, all cash/check and credit card payments are be grouped together and be deposited using Bank Deposits.
Suggestion: After years of trying to explain to clients when to Deposit to the Checking account and when to select Undeposited Funds, I gave up. Not all business owners are savvy enough to decide every time. They forget to look at this field, and the transactions start heading to the wrong account.
I now train everyone to just put all Sales Receipts in Undeposited Funds. Since the Banking Feed looks there anyway, one consistent set of steps creates cleaner data then situation-based instructions.
Now that the Sales Receipt is complete, click Save and send to email the Sales Receipt, Save and new to immediately add another one, or Save and close when you’re done.
Lesson Follow-up
Correct income workflows reduces the need for end-of-month or end-of-period clean-up. Properly making Bank Deposits and matching them to Banking Feeds prevent duplication of income. Appropriate use of Sales Receipts not only record historic transactions but make certain that the payments are posted on the spot.
For follow-up training in this are of QuickBooks Online make certain to check out my QuickBooks Online Fundamentals course.
Over the next couple of installments in this series we will cover Estimates, Progress Invoicing, Creating Invoices, and Receiving Payments.
Make sure to also check out my Mentorship Membership Subscription for Bookkeepers and Accountants and my on-demand QBO tutorial library.