Although it doesn’t happen often, a customer might overpay you. The way you handle the overpayment in QuickBooks Online depends on whether you intend to give the customer a credit or whether you intend to keep the money — as if it were a tip.
Regardless of your intent, make sure that your QBO company is set up to automatically apply credits. Choose Gear →Account and Settings and then click Advanced on the left side of the Account and Settings dialog box. In the Automation section, make sure that Automatically Apply Credits is turned on. This setting forces QBO to create credits if your customers overpay you. Then, you can choose how to use those credits.
Regardless of how you intend to treat the overpayment, find the invoice in the Sales Transactions list and click Receive Payment. Fill in the full amount you received from the customer, including the overpayment amount, in the Amount Received field. Then, do one of the following:
To apply the overpayment to an existing invoice, in the Outstanding Transactions section of the Receive Payment window, select the invoices to which you want to apply the payment. Typically, the payment will fully pay at least one invoice and partially pay another invoice. QBO automatically reduces the amount due on the partially paid invoice.
To apply the overpayment to a new invoice (one you haven’t yet created), in the Outstanding Transactions section of the Receive Payment window, select only the overpaid invoice. At the bottom of the Receive Payment window, you can see the amount for which QBO will create a credit when you click Save and Close. When you subsequently create a new invoice for the customer, QBO will automatically apply the credit amount to the new invoice.
If you intend to keep the overpayment as income, create a Tip income account and a Tip service item assigned to the Tip income account. Then, create a new invoice for the customer using the Tip item and the overpayment amount. QBO automatically marks the invoice paid because it uses the overpayment credit it created from the overpaid invoice.
When a business receives an overpayment, it is required to notify the customer and to offer to refund the excess amount or apply it as a credit toward a future invoice. The agreed-upon resolution should be documented and implemented quickly.
When a business receives an overpayment, it is required to notify the customer and to offer to refund the excess amount or apply it as a credit toward a future invoice. The agreed-upon resolution should be documented and implemented quickly.
You can make journal entries to write off small amounts related to customer overpayments. Note: You may prefer to apply a customer overpayment against an outstanding invoice.
The employer should talk to the employee first and agree how the money will be paid back. For example, if the employer recently made a simple overpayment, they could let the employee know that they'll deduct it from the next pay. They could also agree to pay the money back a different way, for example by bank transfer.
Mistakes can happen, but there are a number of ways you can easily handle the overpaid amount: apply it to another unpaid invoice. create a credit and refund the amount. create a credit and apply it to a future invoice.
Prepayments attract tax and should be used for intended future work. If a customer has paid you too much by mistake, or if you accidentally overpay a supplier, create an overpayment instead. Prepayments for payments you've received are assigned an invoice number, through the same sequence as invoices.
An unintentional overpayment by the customer is a credit to his AR balance. However, too many credit balances skew the true AR balance and need to be reclassified. You would debit the AR balance and credit a liability account. All overpayments are liabilities until a refund is issued, or the amount is eshceated.
If the invoice is from a regular supplier, the easiest solution is often to apply the overpayment to a new or existing invoice. Other options include refunding the overpayment or being given a credit note that you can allocate against a future invoice.
Select the checkboxes for the invoices you want to write off.Select Write off.In the Account ▼dropdown, select the account you use for bad debts.Select Apply.
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