How to Record a Customer Payment

When a client pays an invoice, you need to record the payment in QBO so the invoice is marked as paid and the money shows up correctly in your books. If you don't record it, the invoice stays open as unpaid, overstating your accounts receivable and making your books inaccurate.

What You'll Need

• Access to QuickBooks Online
• The payment amount and date
• Knowledge of which invoice(s) the payment is for

Normal Procedure

Receiving a payment in QBO

1. Go to + New > Receive Payment.
2. In the Customer field, select the client who paid.
3. Enter the Payment date and Amount received.
4. Select the Payment method (e.g., bank transfer, check, credit card).
5. In the Deposit to field, select the bank account the money landed in (usually your business checking account).
6. In the outstanding invoices section at the bottom, check the box next to the invoice(s) this payment covers.
7. Click Save and Close.

The invoice is now marked as paid and the payment is recorded as a deposit in your bank account register.

Matching a payment from the bank feed

If the payment came through your bank feed before you recorded it in QBO:

1. Go to Transactions > Bank transactions and find the deposit in the For review tab.
2. Click Find match.
3. QBO will show open invoices that match the amount. Select the correct one.
4. Click Confirm to match and clear the transaction.

This method links the bank deposit directly to the invoice, which is clean and tidy for reconciliation.

Abnormal Procedures

The client paid a different amount than the invoice (short payment).

Record the payment for the amount actually received and apply it to the invoice. The remaining balance stays open as unpaid. Follow up with the client to collect the difference, or, if you've agreed to accept the short amount, ask your NCO bookkeeper to write off the remainder as a bad debt.

The client paid multiple invoices in one transfer.

Record one payment for the full amount received and check the boxes for all the invoices it covers. QBO will split the payment across them automatically.

You received a check but haven't deposited it yet.

In the Deposit to field, select Undeposited Funds instead of your checking account. This holds the payment in a clearing account. When you deposit the check at the bank, record the deposit in QBO and it will pull from Undeposited Funds, keeping your bank feed and books in sync.

A client's payment bounced (NSF).

Let your NCO bookkeeper know immediately. They'll reverse the payment in QBO, reinstate the open invoice, and record the NSF bank fee. You'll also need to follow up with the client to arrange alternative payment.

FAQ

What if the payment came through Stripe, Square, or Shopify?

Payments through third-party processors need to be reconciled differently. See: How to Reconcile Stripe, Shopify, or Square Sales in QBO.

Do I need to record every ACH or wire transfer manually?

If your bank feed is connected, the transfer will show up as a deposit in the For review tab. You can match it to the invoice from there rather than creating a separate payment record. Either method works, just don't do both or you'll duplicate the deposit.

What's the difference between "Deposit to checking" and "Undeposited Funds"?

Use checking when the money is already in your account (e.g., an ACH transfer that cleared). Use Undeposited Funds when you have a check in hand that you haven't taken to the bank yet. Undeposited Funds is a temporary holding account that clears when you record the bank deposit.

How do I see all payments received in a period?

Go to Reports > Payments received or check your Sales > All Sales view filtered by payment. Your NCO bookkeeper can also pull a custom report if you need it.