Aside from sending invoices to clients, it is equally important to make sure payments are being applied to their corresponding invoice. This has several benefits, including most importantly that this enables you to keep track of open or unpaid invoices. If payments or deposits are never applied, it can get harder and harder to keep track of clients who haven't paid, especially as your business grows.
Also, leaving invoices open will affect your financials, especially if under the accrual method of accounting:
You'll have double the revenue - one from the invoice, one from the payment
Will overstate your accounts receivables in financial statements
If you're under cash basis accounting, we still highly recommend you to follow the same procedures consistently to keep your books sparkling clean!
Follow these steps to apply deposits to your invoices:
From the deposit transaction:
Open the deposit transaction. You can do this by navigating your transactions and opening the specific deposit transaction. We suggest using the Deposits Only filter by Types so you have less transactions to sort through.
Open the dropdown list Choose an Invoice. You can find this right below the Income Type box, which would by default show Regular Income.
Select the invoice you'd like to apply it to and save. We only show the most recent invoices, but you can search for older invoices either by reference number, client name, or amount. Note that numbers should be whole numbers. If the invoice reference number is 2014-0001, just search for 0001. If the amount was $500.50, just search for 500.
If applying to two or more invoices, continue on to these steps below:
Click on the Split button. Now, you have two splits to your invoice. You can click Split multiple times until you reach the desired number of splits. Note that the last split will always be auto calculated as the remainder based on total applications of deposits in all prior splits. You can apply each new split to its own invoice, or each split's own category.
Please note: You must use Regular Income as the income category to apply deposits to invoices.
From the invoice itself:
Open the invoice you'd like to apply a deposit to
Scroll toward the bottom and click the Apply Payments button
Select the deposit transactions that you'd like to apply*. If you need to manually create a deposit, click the New Deposit link in the top right of the Apply Payments section.
*Please note: We will only show deposits from 10 days before the invoice date as well as all deposits after that invoice date because t is unlikely you will have received a payment more than 10 days before you even sent the invoice.