Skailit - QuickBooks Online Refresher Course

3.1 Understanding Sales Transactions in QuickBooks Online

QBO offers different transaction types for recording revenue. Choose the correct one based on when payment is received.

3.2 Creating Customer Invoices

Invoices are used when you provide goods/services and expect payment later.

Step-by-Step Invoice Creation:

1. Go to + New → Invoice
2. Select or add Customer
3. Enter Invoice Date and Due Date (or choose terms like Net 30)
4. Add Products/Services with proper income account
5. Apply HST/GST at correct rate for customer's province
6. Add message or terms if needed
7. Save and send via email or print

Sample Invoice: Acme Corporation

Behind the Scenes - Journal Entry:

3.3 Receiving Customer Payments

When a customer pays an invoice, record the payment to clear the receivable.

Payment Recording Process:

1. Go to + New → Receive Payment
2. Select the customer
3. Enter payment date and amount
4. Choose payment method (Bank Transfer, Cheque, Credit Card, etc.)
5. Select "Deposit to" account (Bank or Undeposited Funds)
6. QBO shows outstanding invoices — checkmark which to pay
7. Save

Payment Entry Screen:

Journal Entry:

3.4 Credit Memos – Reducing Customer Balances

Use Credit Memos for returns, billing errors, discounts, or service adjustments.

Creating a Credit Memo:

1. Go to + New → Credit Memo
2. Select customer
3. Enter credit memo date
4. Add items being credited (use negative amounts or credit memo format)
5. Apply HST if original invoice had HST
6. Save and apply to invoice or keep as credit

Example: Tech Startup Co.

Credit Memo Screen:

Journal Entry:

3.5 Managing Accounts Receivable Aging

The A/R Aging report shows outstanding invoices grouped by how long they've been unpaid.

A/R Aging Categories:

• Current: Not yet due
• 1-30 days: Overdue up to 30 days
• 31-60 days: Overdue 31-60 days
• 61-90 days: Overdue 61-90 days
• 90+ days: Seriously overdue (collection action needed)

Sample A/R Aging Summary:

When Invoices Are Overdue (90+ Days):

Best Collection Practices:

• Review A/R Aging weekly
• Send polite reminders at 30 days
• Firmer notices at 60 days
• Phone calls at 90+ days
• Consider early payment discounts (2/10 Net 30)
• Stop providing services to chronic non-payers
• Use QBO's automated reminder feature

Setting Up Automated Reminders:

3.6 HST on Sales Transactions

Canadian businesses must charge and collect HST/GST on most sales.

Key HST Concepts:

• HST Collected: Tax charged to customers (recorded as liability)
• HST Payable: Amount owing to CRA after deducting Input Tax Credits
• Formula: HST Payable = HST Collected - HST Paid (ITCs)

Provincial Rates:

Calculating HST Payable:

3.7 Sales Reports for Decision Making

Key Sales Reports in QBO:

• Sales by Customer Summary: Total sales per customer
• Sales by Product/Service: What you're selling most
• A/R Aging Summary: Outstanding invoices by age
• A/R Aging Detail: Invoice-level detail on receivables
• Invoice List: All invoices with status
• Open Invoices: Unpaid invoices only
• Customer Balance Summary: Total owed by each customer

Accessing Reports:

3.8 Common Sales & AR Mistakes

• ❌ Double revenue entry: Creating Sales Receipt for invoice payment (instead of Receive Payment)
• ❌ Wrong HST rate: Not adjusting for customer's province
• ❌ Not following up on overdue invoices: Letting AR age beyond 90 days
• ❌ Depositing cheques directly: Not linking to invoice (AR never cleared)
• ❌ Using wrong transaction type: Sales Receipt when should use Invoice
• ❌ Not applying payments correctly: Payment to wrong invoice or customer
• ❌ Ignoring credit memos: Not reducing AR for returns
• ❌ Poor credit policies: No credit checks on new customers

3.9 Best Practices for AR Management

• Set clear payment terms upfront (Net 30 is standard)
• Send invoices immediately after work completion
• Use professional invoice templates with clear payment instructions
• Enable online payment options (credit card, bank transfer)
• Review A/R Aging weekly
• Send automated reminders for upcoming and overdue invoices
• Follow consistent collection procedures
• Document all customer communication in QBO notes
• Consider deposits or milestone billing for large projects
• Assess new customers' creditworthiness before extending terms
• Reconcile AR sub-ledger to general ledger monthly

3.10 Quick Self-Check

Q1: Customer pays an existing invoice. What transaction type should you use?

✓ Receive Payment (never Sales Receipt for existing invoices)

Q2: When is revenue recognized under accrual accounting?

✓ When the invoice is issued (when earned), not when cash is received

Q3: What report shows overdue invoices grouped by age?

✓ A/R Aging Summary or A/R Aging Detail

Q4: How does a credit memo affect HST Payable?

✓ Reduces (decreases) HST Payable by the tax amount on the credit

Q5: What should you do when invoices are 90+ days overdue?

✓ Review aging, contact customers, send reminders, escalate collections, assess write-offs

Q6: How do you calculate HST payable to CRA?

✓ HST Collected from customers minus HST Paid on expenses (ITCs)

Q7: What's the risk of creating a Sales Receipt when customer pays an invoice?

✓ Revenue is recorded twice (once on invoice, again on sales receipt)

✓ Module 3 Complete

You've learned:

• Different sales transaction types and when to use each
• How to create and manage customer invoices
• Proper payment recording to clear AR
• Credit memos for returns and adjustments
• A/R Aging reports and collection procedures
• HST on sales transactions and remittance calculation
• Critical error: Never double-record revenue
• Best practices for AR management
• Actions to take for overdue invoices (90+ days)
• Key sales reports for decision making