How do I subtract a received payment from an invoice that will show that received payment and update the total amount due remaining?

Let me guide you in subtracting a payment from an invoice and update the total amount due remaining, Purehvac.

First off, could you please provide more details about your concern? This way, I can offer a tailored solution. Did you receive this payment outside QuickBooks Online (QBO)? If so, you'll need to record the payment as bank deposit affecting Accounts Receivable (AR). On the other hand, if this payment is within the program, you can record the payment and add the amount in the Receive Payment window.

1. Click +New and click Receive payment.
   
   
   
   
2. Complete the Customer, Payment Date, Payment method, and Deposit to dropdown.
   
   
   
   
3. In the Amount received field, enter the amount your customer paid.
4. In the Outstanding Transactions section, tick the checkbox for the invoice you're recording the payment for.
5. Enter the Reference no. and Memo if needed.
6. Hit Save and close.

To check the outstanding balance for the specific customer or the invoice you applied payment to, here's how:

1. Go to Sales and select Customers.
   
   
   
   
2. Locate and click the customer's name.
3. Select the Transaction List tab.
4. From the Type dropdown, click Invoices.
5. Locate the invoice.
6. Under the STATUS column, you'll see Partially paid, including the remaining amount due.

Additionally, I'll share this article to assist you in generating proof of transaction whenever your customer immediately pays for products or services: Create sales receipts in QuickBooks Online.

Finally, you can take advantage of our QuickBooks Live Expert Assisted service for personalized guidance to help streamline your payment records according to your unique business requirements. Our dedicated experts work directly with you to create customized solutions that align with your company's specific needs.

Please don't hesitate to comment below if you have other invoice concerns. We'll be around to respond. 

@purehvac23 

If you want the payment received to show as a line item on the invoice, the instructions provided by @CamelleT won't accomplish that.  To have it show as a line item on the invoice, create a service product called, 'Payment Received' and select your bank account or undeposited funds as the 'Income account', depending on how the payment is deposited into your bank account.  Then, when you receive the payment, add the 'Payment Received' service item to the invoice as a negative amount.  That will show as a separate line item on the invoice, reduce the amount due, and put the cash into either your bank account or undeposited funds.  IMO, QB should have an easier way to handle prepayments/deposits on invoices.  

@purehvac23 

I forgot to mention that this process works fine if you're on accrual basis.  If you're on cash basis, QBO will not report the income until the invoice is paid in full which is incorrect since prepayments/deposits are income for cash basis taxpayers when received.  In other words, the deposits/prepayments on partially-paid invoices will not show as income.  I don't know any way around that.  Depending on how many invoices you have outstanding at any given time, this may or may not be an issue.  

Question Regarding Advance Payment Deduction and Retention in Progress Invoices

The question raised by purehvac23 is very valid, and I am looking for a solution to the same accounting issue in QuickBooks Online.

We are a civil contracting company and we use accrual-basis accounting. We prepare progress invoices based on the work completed under each construction contract.

Our normal billing procedure is as follows:

For example, if the current progress invoice is AED 100,000:

1. Gross progress invoice: AED 100,000

2. Less 10% advance/down-payment recovery: AED 10,000

3. Less 10% retention: AED 10,000

4. Less advance amounts received previously, as applicable

5. The remaining amount is the current amount payable by the client.

The advance/down-payment was received by us before the progress invoices were generated. Therefore, we do not want this previously received amount to be recognized again as income when we deduct it from subsequent progress invoices.

What we need in QBO

We want to create an account/item for the advance/down-payment received from customers so that:

• The money received in advance is recorded and tracked against the relevant customer/project.

• It should not increase income or affect the P&L when received, because the revenue is recognized through the progress invoice under accrual accounting.

• When we issue a progress invoice, the previously received advance should be deducted from the invoice total.

• The deduction should reduce the customer's outstanding balance without creating duplicate income or expense.

• We also need to deduct 10% retention from each progress invoice and keep the retention amount separately trackable until it becomes payable by the client.

• We need the final invoice to clearly show:

Gross Progress Value
– Advance Recovery
– Retention
– Previous Amounts Received/Recovered
= Current Amount Payable

Main Question

What exact account type, detail type, Product/Service items, and QBO workflow should we use to record the advance/down-payment received from a customer so that the amount remains properly tracked but does not affect the P&L, and can subsequently be deducted from progress invoices without reducing or duplicating the actual revenue recognized under accrual accounting?

Also, is there a recommended QBO workflow specifically for construction contractors using progress invoicing with advance recovery and retention, where the advance is received before the progress invoices?

If QBO does not currently have a direct feature for this, please explain the recommended accounting workflow using QBO's existing features, including how the advance liability should be created, how it should be applied to progress invoices, and how the retention should be recorded.

We would prefer a solution that allows us to stop maintaining separate Excel schedules and manage the advance balance, retention balance, invoices, deductions, and outstanding amount entirely within QBO.

For reference, QBO's existing guidance indicates that customer retainers/deposits can be recorded in an Other Current Liabilities account and later applied as a negative line on an invoice. However, we need clarification on the best workflow for our specific accrual-basis construction progress billing process.