Mystery QuickBooks Credit Balances

How to Record QuickBooks Cash Sales Correctly

Several times each week we receive a query that reads something like this: "Many of my customers have credit balances, and I've never used the QuickBooks Credit Memo function. What is going on?" When we write back and ask if they ever collect payment at the time of the sale (a cash sale), they respond in the affirmative.

What's the problem?

Here's the answer:

When this happens, it's almost always due to the fact that the user is selecting Receive Payments from the QuickBooks Customers menu or the Home Page. The Receive Payments transaction is for receiving payment on an existing invoice, and automatically posts a credit to Accounts Receivable. When you have a cash sale, you must use the Sales Receipt transaction. (There are other ways to create an unwanted credit accidentally, but 90% of the time, the problem is caused by using Receive Payments when no invoice exists.)

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