Receiving Customer Prepayments in QuickBooks Desktop Enterprise

QuickBooks Desktop Enterprise includes a built-in prepayments feature that lets users collect customer deposits against sales orders and estimates before an invoice is generated. The capability has been requested for years by businesses that take deposits on custom orders, and Enterprise now handles the workflow natively — though with several important limitations that users discover along the way.

Enabling Prepayments

Before anything else, the feature must be turned on at the company level. Users navigate to the Preferences dialog under the Edit menu, select the Payments section, and open Company Preferences. Inside the Prepayments area, a settings screen provides the option to turn the feature on. During setup, QuickBooks asks users to designate a current liability account to hold deposited funds — this can be an existing account or a new one created on the spot. Once the liability account is selected and the preferences are saved, the feature is active.

Receiving a Prepayment

After the feature is enabled, prepayments can be recorded from a new or existing sales order or estimate. Within the transaction window, users select Receive Payments and choose either Prepayment on Sales Order or Prepayment on Estimate, depending on the form type. The same option is accessible from the homepage or the Customer Center — users just need to specify the transaction type and then select the relevant sales order or estimate before entering the deposit amount and saving.

Once saved, the sales order or estimate displays the amount under a Prepayment Applied field, confirming the deposit has been recorded against that transaction.

Printing Forms That Show the Deposit

Customers often want a printed copy of the order showing their deposit and the remaining balance. Enterprise supports this through the form’s customization tools. Users open the sales order or estimate, select Formatting, then Customize Data Layout, and navigate to the Footer section. There, checkboxes for Prepayments and Balance Due can be enabled so both figures appear on the printed document. The Layout Designer provides further control over where those fields sit on the page.

Applying the Prepayment to an Invoice

When it is time to bill the customer, users open the associated sales order or estimate and select Create Invoice. Enterprise offers the standard two paths: invoice the entire sales order, or invoice only selected items. After saving the invoice, QuickBooks prompts the user to apply the available prepayment credit. Selecting Yes at that prompt applies the deposit to the new invoice, reducing the amount due.

Users can also apply the credit manually by selecting Apply Credits on an existing invoice, choosing the prepayment credit, and entering or adjusting the amount to apply.

Behind the scenes, QuickBooks records the transfer through two general journal entries. The first moves the deposit out of the liability account as a positive amount. The second applies it to accounts receivable as a negative amount, offsetting the invoice balance.

Tracking Open Prepayments

Enterprise provides reporting tools to monitor deposits that have not yet been applied to invoices. The Open Prepayments by Customer report, found under Reports > Customers & Receivables, shows outstanding deposit balances. Users can filter this report by Prepayment Balance to isolate deposits that are fully or partially unapplied.

For a broader view that includes both estimates and sales orders, the Open Sales Orders by Customer report can be filtered by multiple transaction types — selecting both Estimate and Sales Order — to see all open prepayment-bearing transactions in one place.

Key Limitations

The prepayments feature comes with constraints that have caught users off guard:

• Sales orders and estimates only. Prepayments cannot be recorded against other transaction types. If your workflow does not use sales orders or estimates, the feature provides no benefit.
• No multi-currency support. Prepayments and multi-currency are mutually exclusive. Turning on multi-currency after prepayments have been used will disable the prepayments feature entirely — a one-way door that users should understand before switching.
• No editing after application. Once a prepayment credit has been applied to an invoice, the prepayment itself cannot be edited. Corrections require refunding or adjusting the applied credit through other means.
• Locked transfer account. The Account for Prepayment Transfer is an internal account QuickBooks uses to move funds between the liability account and accounts receivable. Users cannot modify it.
• Restricted account selection. A sales tax account or sub-account classified as Other Current Liability cannot be designated as the prepayment liability account.

Refunding a Prepayment

If a customer cancels an order or overpays, Enterprise provides a refund path for prepayments. The process returns the deposited funds to the customer and reverses the liability entry, though once a prepayment has been applied to an invoice the refund workflow is no longer available — the credit would need to be handled through standard credit memo procedures instead.

For businesses that rely on deposits as part of their order workflow, the built-in feature eliminates the need for manual journal entries or workarounds — provided the limitations above fit the business model.