In a world where your clients pay timely, this options would never be needed. You would always have more money from your clients than the goods and services you’ve delivered to them. In this scenario, when you create the delivery invoice, there are funds to pay it off right then and there. So iPoint will add a negative line item to the delivery invoice that “pays off” the delivery invoice and the balance would be $0. It would look something like this:
- December 1: You send an RFP to your client for $10,000
- December 5: Client pays $10,000
- December 15: You install $10,000 worth of parts and labor
- December 18: You create a Delivery Invoice for the $10,000
- December 18: iPoint applies a negative line item on the Delivery Invoice for $10,000 (the amount the client paid you) to balance the Delivery Invoice to $0 due
Unfortunately, we don’t live in that perfect world, so let’s talk about another scenario and your options.
- December 1: You send an RFP to your client for $10,000
- December 5: Client pays $8,000
- December 15: You install $10,000 worth of parts and labor
- December 18: You create a Delivery Invoice for the $10,000
- December 18: iPoint applies a negative line item on the Delivery Invoice for $8,000 (the amount the client paid you) to balance the Delivery Invoice to $2,000 due
- January 5: Client pays remaining $2,000
- January 5: You apply the new $2,000 on the Delivery Invoice and iPoint applies a negative line item on the Delivery Invoice for $2,000 to balance the Delivery Invoice to $0 due
THIS LAST STEP IS PROBLEMATIC!
Why? Because the payment was made on a new month and a new year, but QB only sees it on the December 18th Delivery Invoice. This can throw of your end of month and end of year accounting.
To avoid that problem, iPoint recommends that you use a credit memo to satisfy that final $2,000 Payment. This would look like this instead:
- December 1: You send an RFP to your client for $10,000
- December 5: Client pays $8,000
- December 15: You install $10,000 worth of parts and labor
- December 18: You create a Delivery Invoice for the $10,000
- December 18: iPoint applies a negative line item on the Delivery Invoice for $8,000 (the amount the client paid you) to balance the Delivery Invoice to $2,000 due.
- January 5: Client pays remaining $2,000
- January 5: You apply the new $2,000 on the Delivery Invoice and iPoint will create a credit memo for the $2,000 and apply it to the delivery invoice
You do the exact same steps, but iPoint jumps in and knows to use a credit memo so the dates are accurate in your books. The credit memo will go into QB with a January 5th date and all will be well.
Why don’t I just use a credit memo every time?
You absolutely can, but that’s a LOT of credit memos and would likely make your books quite messy. This scenario should be quite rare as most companies are getting enough money ahead of time to cover their goods and services before they deliver them.
OK, so what settings should I select?
We’ve pre-loaded you with our default settings that are:
- Prompt to ask if you should use a Credit Memo
- This is just so you know something is going to be different about the payment you are applying, feel free to turn this off if it’s annoying
- Use Credit Memos As Needed
- This is so you can pick the rules of when you want to use a credit memo instead of a negative line item
- It’s Necessary when you are applying payment on a Different Month than the date of the delivery invoice
- If you are very particular you can select on a Different Date, but most companies don’t need that level of granularity and just need the books to be accurate month to month
