We’ve talked in other episodes about how it is important to make sure your QuickBooks data matches the reality of finances in your business. Another area where business owners struggle with this is making sure that reporting dates for income match the time periods where that income is actually earned not just simply the payment dates.
In today’s episode, Bernard Roesch, we’ll explain how to log client payments over many months so they show up in those months on your profit and loss statement.
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Why Log Payments Over Time for Reporting
Think of this example, you bill a client one time per year, but the service you provide is provided throughout the entire year. If you don’t spread that payment out, your reporting data is going to show all of the income in January and no income throughout the rest of the year. However, your expenses will happen over time and you won’t be able to match that revenue in reports with expenses. By logging this January payment over time, you’re able to more accurately reflect the financial health of the business in your reports. As you earn the income throughout the year, the income will be reported and expenses incurred while earning that income will be matched with the income.
How to Log a Payment Over Multiple Months in QuickBooks
For this example, we’ll assume you received a $12,000 payment for the entire year in January. When you invoice the client for $12,000, log it against deferred revenue in your balance sheet rather than the normal sales item. Then each month as you earn that income record a journal entry against deferred revenue. This journal entry should bring down deferred revenue and bring up revenue for that month. This will ensure that your profit and loss and other reports accurately reflect the income earned over the year.
Need Help with Advanced QuickBooks Reporting?
If you need help configuring more intricate aspects of QuickBooks for your business, contact Bernard today. He can help you set up this type of reporting structure as well as other reporting and financial needs for your business using QuickBooks.
Unsure of which QuickBooks program to use for your business? MISSION Accounting can help.