How to Record Customer Prepayments for Products or Services

In this Article we are going to talk about How to Record Customer Prepayments for Products or Services in 2020.

Some Customers may additionally pay you in develop of you elevating an Invoice for the product or carrier provided. These steps element one way you could report the receipt of money from a Customer in advance of raising the Bill (Payments in Advance / Payments on Account).

Please consult your Accounting expert if you have any doubts about this process, or to see if they have a favored approach of recording these transactions.

How do you report your VAT to HMRC? (select the applicable option below)

Recording Customer Prepayments in this way ensures VAT is reported to HMRC when the payments are received. In this example we have tracked payments against a Current Liability account.  Please consult your Accounting professional to see if they have a preferred method of recording these transactions.

1. Create a Current Liability account to track prepayments.

   1. Click Accounting in the left-hand navigation bar, choose Chart of Accounts.
   2. In Chart of Accounts, click New button.
   3. From the Account Type drop-down list, choose Current Liabilities.
   4. From Detail Type drop-down list, choose Current Liabilities.
   5. Enter the account Name, e.g. Customer Prepayments, click OK.
      • Tip:  If a small number of Customers pay you in this way, you could create Sub-Accounts for each Customer, as this may additionally make it easier to track amounts paid

2. Create a Service item, that posts to the above Account

   1. Click the plus icon in the pinnacle right-hand corner, select Products and Services.
   2. Click New button, Pick Out Service.
   3. Enter a Name, e.g. Customer Pre-Payments.
   4. Go to the ‘Income Account’ field, from the drop-down select the account created in Step 1, above.
   5. Click Save and Close.

3. Enter Sales Receipts for each charge received in advance of the Invoice, posting to the new Service item.

   1. Click the plus icon in the top right-hand corner, select Sales Receipt.
   2. Select the Customer Name, Payment Date and the Bank Account the cash used to be obtained in to.
   3. In the PRODUCT/SERVICE field, select the Prepayments account created in Step 2, above.
   4. In the Amount column enter the Amount received.
   5. Select the VAT Code, click on Save and close.
   6. Repeat steps  for subsequent payments made in advance of the Invoice being raised.

4. Enter the Invoice, making sure the prepayments are taken in to account.  TIP – See the last section at the bottom of this article for a Report that shows amount of prepayments made.

   1. Click the plus icon in the top right-hand corner, Select Invoice.
   2. Enter Customer details as normal, with line items detailing the Services provided, select the relevant VAT code(s).
   3. On the last line item, select the Customer prepayments item created in Step 2, above.
   4. Enter the amount of prepayments as a Negative value, select the VAT Code used in Step 3, above.
      • IMPORTANT – The amount in Step 4d needs to be entered as a negative with a VAT code selected, as this ensures VAT isn’t counted twice.

5. Pay the Invoice balance – If there is a balance due after the prepayment is applied.

   1. Locate and open the Invoice.
   2. In the top right-hand corner, click Receive payment button.
   3. Then in the Amount box enter the amount.
   4. Click Save and close.

To help identify the amount of prepayments made to a Supplier, you can run the following report:

1. Click Accounting in the left-hand navigation bar, discover the Customer Prepayments account.
2. In the Actions column to the right-hand side, click the drop-down next to Account history, select Run Report.
3. Select the required date range by clicking the Report period drop-down
4. If you have all Customer prepayments going to the same account, click the Group by drop-down and select Name.
5. Click Run report.

Having any Questions?

Call +1-(818) 900-9884

Chat Live to the Customer Care Executive

Related Terms: how do i record customer prepayments in quickbooks online, how to record advance payment from customer in quickbooks desktop, customer prepayment accounting, how to record customer deposits in quickbooks online, customer prepayment quickbooks desktop, quickbooks refund prepayment, how to post down payments from customers in quickbooks, how to apply a prepayment to an invoice in quickbooks online, customer prepayment accounting, how to audit customer deposits, how do i record customer prepayments in quickbooks online, how to record advance payment from customer in quickbooks desktop, customer prepayment accounting, how to record customer deposits in quickbooks online, customer prepayment quickbooks desktop, quickbooks refund prepayment, how to post down payments from customers in quickbooks, how to apply a prepayment to an invoice in quickbooks online, customer prepayment accounting, how to audit customer deposits, How to Pay outside the Pay Period in QuickBooks Online Payroll,