If you have encountered the situation in which you have run a list of open invoices and find that you are receiving invoices for customers who have already paid, you know how frustrating it can be to see your customer payment system in disarray. Likewise, you will feel similarly when you run an Accounts Receivable Aging report that shows the aging inaccurately, even if the total does accurately reflect your outstanding accounts receivable. Try this technique to help clear up any mistakes in the recording of your customer payments.
Establish the Routine Procedure
Before you deal with correcting any potential mistakes, be sure that you know the general process involved with accurately recording your customers’ payments. First, you need to go to “Receive Payments” from the “Customers” menu. You will then begin to type the customer’s name who is making a payment in the field named “Received From.” Then, enter the amount that you have received and the invoice that you want to credit the payment to.
Check for Mistakes
Intuit realizes how important it is to have accurate customer and payment data, so it has included a variety of built-in tips in QuickBooks. One of the more common mistakes is for business owners to attempt to enter a customer payment by choosing “Make Deposit” under the “Banking” tab. This is simply incorrect. It also has the consequence of overstating your revenue because it posts the transaction to an income account where the original invoice has already populated. The accounting process behind a customer payment is to increase the cash your business has on hand and debit the accounts receivable.
Another possibility is that you have posted payments without actually allocating the funds to a particular invoice. This may occur even if you designate the appropriate job and customer. This causes you to have open invoices that create credit balances on your aging reports.
Correcting Mistakes
If you find that you have made these types of errors, you can correct them. First, return to the deposit window where the incorrect customer payment was entered. Click on “Accounts Receivable.” Then select your customer and check that the deposit has populated. Go to “Receive Payments” where you will notice that there is a new credit that you formed when you made the deposit journal entry. Apply the credits to the invoices where they belong.
Review Reports
Review your Open Customer Invoice and Accounts Receivable Aging reports at least monthly and at the end of the year. Check that the paid invoices are no longer on your reports.