How could this happen? Normally, a customer payment will apply automatically to any outstanding invoices in the received payment screen. This ACTUALLY happened to one of my clients! This could have some serious consequences if you bring your Profit and Loss report to your tax professional and ask them to estimate your income taxes for the year so far and you have a $ 30,000 customer payment that is not showing up as income. Even if you have created an invoice and received a payment, if the payment is not applied, your Income will be under-stated!
It is important to know that unapplied customer payments and credits will not show up as Income on your Cash-Basis Profit and Loss report. I am talking about payments you have received from customers that were “received” in QuickBooks by using the received payments window, but not applied to an invoice during this process, or credit memos prepared but never applied to an invoice. One issue that many people – including bookkeepers – are not aware of is the way unapplied payments and credits in QuickBooks can affect your Financial Statements. Resolving Unapplied Payments and the Significance
