How do I record a retainer or deposit?

To record a retainer or deposit in QuickBooks Online, you need to set up a liability account to track the funds and a specific item to use when receiving the payment.

Step 1: Create a liability account

First, create an account to track the money you owe back to the customer until you perform the service.

1. Select the Settings gear icon.
2. Select Chart of Accounts.
3. Select New to create a new account.
4. In the Account Type dropdown, select Other Current Liabilities.
5. In the Detail Type dropdown, select Trust Accounts - Liabilities.
6. Give the account a name, such as Retainers or Customer Deposits.
7. Select Save and close.

Step 2: Create a service item for the retainer

Create a specific item to use on invoices or sales receipts so the payment posts to the liability account.

1. Select the Settings gear icon.
2. Select Products and Services.
3. Select New and then Service.
4. Enter a name for the item, such as Retainer or Deposit.
5. Ignore the description and rate fields if you prefer to enter them manually when invoicing.
6. In the Income account dropdown, select the liability account you created in Step 1.
7. Select Save and close.

Step 3: Receive the retainer or deposit

When a customer pays you the retainer or deposit, record it using a Sales Receipt or an Invoice.

Option A: Sales Receipt (Use if you have already received the money)

1. Select + New.
2. Select Sales Receipt.
3. Fill in the customer name and payment date.
4. In the Product/Service column, select the retainer item you created in Step 2.
5. Enter the amount received.
6. Select the payment method (e.g., Check, Credit Card).
7. Select Save and close.

Option B: Invoice (Use if you are sending a bill for the deposit)

1. Select + New.
2. Select Invoice.
3. Fill in the customer details.
4. In the Product/Service column, select the retainer item.
5. Enter the amount.
6. Select Save and send or Save and close. When the customer pays this invoice, you will record it normally using the Receive Payment feature.

Applying the retainer to a final invoice

When you have completed the work and are ready to apply the retainer to the actual invoice:

1. Create the invoice for the final service or product as normal.
2. Select Save and close.
3. Go to the + New menu and select Receive Payment.
4. Select the customer.
5. You will see the open invoice and a credit for the retainer amount in the Credits section.
6. Ensure both the invoice and the credit are checked.
7. Select Save and close. This will zero out the retainer liability and mark the invoice as paid.