Linda Artesani shows how to fix a common QuickBooks Online mistake where revenue gets counted twice: depositing bank transactions straight into income instead of matching them to customer payments first. She walks through spotting the problem in Undeposited Funds, grouping payments into a deposit, and deleting the duplicate without breaking your bank reconciliation.
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Hi there, Linda Artesani, Artesani Bookkeeping. I wanted to go over the flow of accounts receivable in a QuickBooks file. I've had several clients this week that I've had to help with training because they've looked at their records at year-end and realized that their income was being shown, their revenue was being shown at a higher rate than they knew that they had for sales. So we had to troubleshoot why that was. And I'll show you the common mistake that people make in QuickBooks Online and actually in QuickBooks Desktop where this will create this scenario. Mostly QuickBooks Online because of the online bank feed method that we have that automates transactions but can cause this issue. So I'm going to come into my sample file here. And it's a typical sample file. And here's your bank account where you've got all these transactions to download. And people get very excited about downloading these transactions because they just want to get them off the screen. So they'll click onto that tab and it will open up this window. And they'll see, okay, well, I did receive that payment, $1,000 in October. In December, I did have this one. So yep, this is my income. I know I've received this money. So I'm going to put it all in my income account. This is This is the money I received. Basically, it makes sense, right? You receive money and you want to show it as income. However, the problem lies in when you do that, it creates this transaction. There's nothing to do with accounts receivable at all, and it creates a line item directly from the bank into your QuickBooks account showing this as income. Well, what if this income here is derived out of 2 customer payments that you've entered already. You don't want to duplicate the income, and that's exactly what you're doing here. These 2 payments belong— they total up to what the deposit was. So let me show you how this works. So you create an invoice for a customer. We'll use Mary Summer here, and you sold her widgets. So we're going to go into the products and services. So it's just a sales service that we sell. And if we go into the item and edit it, you'll see that this goes into your sales income account. What that means is when you create this invoice for Mary Summers, this is where the level that this invoice is showing the $8,000 into the sales account. You use an item, but the item actually directs itself into the income account. So this is the level that you're showing the income. That being the case, you don't want to go in here and add the income again because now you're making it in there twice. How do you see and find this? Well, to find this particular issue, one of the ways that I find it is if I'm reviewing somebody's records, I'm going to see that there's a bunch of payments just sitting waiting to be deposited that should have been deposited a long time ago, a month ago. So when you see in someone's file or in your own company file that on this balance sheet you will see accounts receivable— undeposited funds has a pretty good-sized balance. It will normally have a balance if you receive a payment at the end of the year, and this is as of December 31st. So if I received a payment on December 31st but it didn't get deposited in the bank till January, Then that's when you'll see that money there. But these payments in here, to see what's in this figure here in undeposited funds, it's just to go to that bank deposit window and you can see that that's the same figure here that's in there, the $12,822.02. So these are these hanging deposits that never got entered, hanging payments from the customer, and they just need to be grouped. So you can see here, when I group these 2 payments, it equals $4,573.60, and that was what my deposit was. So how do I fix this? Let's pretend that this deposit was actually already in the bank register, this manual line item, and it's already been reconciled. How can I fix this deposit without undoing and disrupting my bank reconciliation? So we're just going to select the payments that equal that amount and just trash can this line item. So now the deposit stayed the same, and you can check your bank match to make sure. There it is, my deposit, same amount, and I can just hit Save and Close here. And now I've taken my income that happened at the level of the invoice and grouped those 2 payments together and put them into that one deposit. And I've just taken that line item, that duplicate item that was pointing to my income account. That's what you really want to do to show the income one time and not twice. So if we come over to Reports, you know, I love this new screen. So we'll go into our Profit and Loss file and see what is in our income account now. And here you can see that we've got the individual transactions that were grouped for payments. So before we had a line item that said Deposit and it showed $4,573.60. In addition to these 2 payments, But now we only show the one because we removed that line item that was in there that showed the 2 things together as a grouped deposit line item transaction showing income. So you really don't want to see something like this with a deposit and it going directly into sales. You want to find out what were the payments, payments or payment That came from your client, your customer, that equaled the $1,475, and then attach them. Maybe you haven't entered them yet, attach them, and then trash can the line item. So what you want to see in this income is just invoices. That's the level you want to see it at. So I hope that clears up some of the double income that you're seeing on your records, and hopefully that would clear up at the year end Undeposited funds account. You don't want to see a large amount in that undeposited fund account. You only want to see maybe something that was received at the very end of December and that's being deposited in January. If you have a very large amount of money sitting in undeposited funds, that needs to be addressed because you really need to show the money at the invoice level and customer payment And show the proper flow of accounts receivable. That will help you to target your income to be exactly what it is, remove any duplication, especially at tax time, because I don't want to be paying estimated taxes on money that wasn't earned. I want to show my income, show my flow of accounts receivable with my customers at the sales receipt or invoice level. I don't want to be using the banking and just willy-nilly depositing them into sales income unless you have a company where you're tracking that in an outside app. So I hope that kind of clears up the flow of accounts receivable with QuickBooks Online. If you have any questions or would like to see any further topics reviewed with QuickBooks, please reach out to me. I'll post that in my Facebook— links in my Facebook to this blog, this video, so that you can come back and reach out to me. I am responsive on Facebook, so it's the easiest way to get back to me, or just reach out to me if you'd like me to help you with cleanup on, on my website. There's a place there where you can connect and fill out the information, and I get back to you. So I hope everybody has a really happy January, and I will be back with more videos. This month is Been a little eye-opening. I've got a lot of ideas for videos, things that have to do with year-end, and I'll be addressing those soon. Thank you so much. Bye now.
