How to Take a Customer Prepayment or Deposit on a Sales Order in QuickBooks Desktop

Before you start

• Sales orders are only in QuickBooks Desktop Premier and Enterprise. Turn them on with Enable Sales Order at Edit > Preferences > Sales & Customers > Company Preferences.
• Customer Prepayments need QuickBooks Desktop Enterprise 24.0 or later. They work only with sales orders and estimates, including progress estimates.
• Prepayments don't work with multicurrency. Intuit says turning multicurrency on turns Prepayments off.
• Both routes hold the deposit in a current liability account until you invoice. Intuit treats deposits as liabilities, not income. Ask your accountant which liability account to use.

Pick your route

Step 1 (Enterprise): Turn on Customer Prepayments

1. 1Go to Edit > Preferences.
2. 2Select Payments, then the Company Preferences tab.
3. 3Under Prepayments, select Prepayment Settings.
4. 4Select Turn On Prepayments.
5. 5In Current Liability account, choose the account for prepayments, or create a new one.
6. 6Select OK, then OK again to close Preferences.

QuickBooks uses an internal Account for Prepayment Transfer to move the money from the liability account to Accounts Receivable. You can't change that account. You also can't pick a sales tax liability account for prepayments.

Step 2 (Enterprise): Receive the prepayment on the sales order

1. 1Create and save the sales order, or open an existing one.
2. 2Select Receive Payments, then Prepayment on Sales Order. For a quote, open the estimate and choose Prepayment on Estimate.
3. 3Enter the amount and the other payment details.
4. 4Select Save and Close. The amount now shows as PREPAYMENT APPLIED on the sales order.

You can also start from Receive Payments on the Home page or in the Customer Center. Choose Prepayment on Sales Order, then select the sales order or orders the money is for.

Show the prepayment on the printed sales order

1. 1Open the sales order and select Formatting.
2. 2Select Customize Data Layout, then Footer.
3. 3Check Prepayments and Balance Due. Use Layout Designer if you want to move the fields.
4. 4Select OK, then Print.

The rest of the layout is covered in how to customize an invoice or sales order template.

Step 3 (Enterprise): Apply the prepayment when you invoice

1. 1Open the sales order and select Create Invoice.
2. 2Choose to invoice the whole sales order or only selected items.
3. 3Save the invoice. When QuickBooks asks whether to apply prepayment credits, select Yes.
4. 4Select the prepayment credit, enter or change the amount to apply to this invoice, then select Done.

You can also select Apply Credits on an invoice to use a prepayment. For each prepayment credit you apply, QuickBooks creates two general journal entries: a positive amount to the liability account and a negative amount to Accounts Receivable. You'll find them under that customer or job in the Customer Center. For partial shipments, see how to turn a sales order into an invoice.

Step 4 (Enterprise): Track open prepayments

• Reports > Customers & Receivables > Open Prepayments by Customer lists prepayments not yet applied to an invoice. To include fully applied ones, select Customize Report > Filters and set Prepayment Balance to Either.
• Reports > Sales > Open Sales Orders by Customer has a Prepayment Open Balance column. To add open estimates, filter Transaction Type to Multiple Transaction Types and select Estimate and Sales Order.
• Reports > Jobs, Time & Mileage > Estimates by Job also has a Prepayment Open Balance column.

Without Prepayments: use an upfront deposit item

Intuit's upfront deposit article doesn't rely on Prepayments, so it's the route when Prepayments aren't available. The deposit is recorded on a sales receipt, not on the sales order.

Set up the account and item once

1. 1Open the Chart of Accounts, right-click and select New.
2. 2Choose Other Current Liability as the type and give it a name, such as Upfront Deposit. Leave the opening balance at zero unless you already hold deposits you're bringing in.
3. 3Go to Lists > Item List, right-click and select New.
4. 4Choose Other Charge as the type for deposits on products, or Service for deposits on services.
5. 5Name the item, choose the liability account in Account, then select OK.

Record the deposit

1. 1Go to Customers > Enter Sales Receipts and choose the customer in Customer:Job.
2. 2If Deposit To shows, choose the account the money goes into. If it doesn't, the money goes to Undeposited Funds for a later bank deposit.
3. 3Choose the payment method, and check the date and sale number.
4. 4In the Detail section, choose the upfront deposit item and enter the deposit amount.
5. 5Select Save and Close. QuickBooks records the deposit as a liability.

Money that lands in Undeposited Funds still needs a bank deposit. See how to fix Undeposited Funds and deposits.

Apply the deposit to the invoice

When the order ships, create the invoice as usual. Then use one of Intuit's two methods to apply the deposit.

• As a line on the invoice: on the next empty line, choose the upfront deposit item and enter the amount you're applying. This reduces the amount due. If the deposit covers the whole invoice, it's marked paid.
• As a credit: go to Customers > Create Credit Memos/Refunds, choose the customer, enter the upfront deposit item and amount, and save. In Available Credit, choose Apply to an invoice, pick the invoice and select Done.

The credit route works like any other credit. See creating and applying credit memos.

If the customer cancels

• Enterprise prepayment not yet deposited in the bank: Intuit says you can delete the prepayment along with the sales order, estimate or invoice it's applied to.
• Enterprise prepayment already deposited: create a credit memo and apply it to another invoice, or write the customer a check.
• Upfront deposit you keep, in full or in part: create an invoice with the items for the canceled order. Then add the upfront deposit item with the amount you're keeping as a negative number.
• Upfront deposit you refund: create a credit memo with the upfront deposit item, choose Give a refund, and select the bank account the deposit went into.

The refund steps are in how to refund a customer.

Things that trip people up

• A prepayment can't be edited once it's applied to an invoice. Delete it, which also deletes its two journal entries, and enter a new one.
• Prepayments attach to a sales order or estimate, so create the order before you take the money.
• Turning on multicurrency switches Prepayments off, and multicurrency can't be turned off again.

If you deal in foreign currencies, read how to set up multicurrency before you turn it on.

Where QuickBooks Desktop leaves the work to you

• Someone has to decide how much deposit each order needs and tell the customer.
• Someone has to match each deposit that arrives to the right sales order and record it.
• With the upfront deposit route, the deposit sits on a sales receipt, so someone has to remember to apply it when invoicing.
• Open prepayments and deposits need a regular check so none sit unapplied.

How Logistify helps

Logistify doesn't take deposits or record prepayments. The Sales Order Service enters customer orders that arrive by email, PDF, WhatsApp, SMS, voicemail or paper into QuickBooks Desktop as sales orders. A person reviews the exceptions. Your team then has the sales order ready to take the prepayment against.