Yes, you can turn on the setting to automatically apply credits.  It is in the gear>acct. settings>payments.

Resolution for 'before service issue: 'Customer’s pay before service provided, deposit hits acct as AR, when I generate an invoice I don’t want to accept another payment but apply A/R received previously' available: Yes.

The before service issue or error code is a known issue in Quickbooks Online (QBO) and/or Quickbooks. Support for this issue is available either by self-service or paid support options. Experts are available to resolve your Quickbooks issue to ensure minimal downtime and continue running your business. First try to resolve the before service issue yourself by looking for a resolution described in the article. If it is a complex before service issue or you are unable to solve the issue, you may contact us by clicking here or by using other before service support options.

For more information about resolving issues related to before service in Quickbooks/QBO or to get support for the issue 'Customer’s pay before service provided, deposit hits acct as AR, when I generate an invoice I don’t want to accept another payment but apply A/R received previously', click the link below: