QuickBooks 2011: The Missing Manual

Deposits, Down Payments, and Retainers

Deposits, down payments, and retainers are all prepayments: money that a customer gives you that you haven’t actually earned. For example, a customer might give you a down payment to reserve a spot in your busy schedule. Until you perform services or deliver products to earn that money, the down payment is more like a loan from the customer than income.

Receiving money for something you didn’t do feels good, but don’t make the mistake of considering that money yours. Prepayments belong to your customers until you earn them, and they require a bit more care than payments you receive for completed work and delivered products. This section explains how to manage all the intricacies of customer prepayments.

UP TO SPEED: Different Ways to Apply Payments

Most of the time, customers send payments that bear a clear relationship to their unpaid invoices. For those payments, QuickBooks’ preference to automatically select invoices (Multiple Currencies) is a fabulous timesaver: You type the payment amount in the Amount box, and the program selects the most likely invoice for payment. When a payment matches an invoice amount exactly, this feature works perfectly almost every time.

But every once in a while you receive a payment that doesn’t match up, and you have to tell QuickBooks how to apply the payment. For example, if the payment and the customer’s available credit (taken together) match an open invoice, you can use the method explained on ...