Before You Start

This guide assumes you have administrator access to the ‘Receive Payment’ and ‘Customer’ centers in QuickBooks Online.

Overview

20 min
Estimated Time
Intermediate
Difficulty
Monthly
AR Cleanup

What You’ll Learn

  • How to identify unapplied payments and credits
  • Steps to correctly apply them to open invoices
  • Methods for cleaning up old or erroneous AR entries
  • Tips for maintaining an accurate AR aging report

1. Understanding Unapplied Amounts

Unapplied amounts in QuickBooks impact your Accounts Receivable aging report. They represent money received or owed that hasn’t been matched to an invoice.

Common Types

  • Unapplied Customer Payment (Open Balance)
  • Unapplied Credit Memo (Open Balance)
  • Customer Overpayment (Open Balance)

Typical Causes

  • Payment received before invoice was created
  • Payment entered without selecting corresponding invoice
  • Credit memo issued but not applied to a future invoice

2. Locating Unapplied Transactions

You have two primary ways to find these elusive transactions.

Method A: Running Reports in QuickBooks

This is the quickest way to get an overview.

Pros:
  • Quick overview of all customers.
  • Identifies total unapplied amounts.
  • Reports: “Customer Balance Detail”, “Open Invoices”.
Cons:
  • Limited direct action from reports.
  • Can be overwhelming for large lists.
  • Doesn’t always show the specific unapplied transaction type.

Method B: Drilling Down in the Customer Center

This method offers precision for resolution.

Expert Tip: Drilling down into individual customer accounts is often the most efficient way to pinpoint and address specific unapplied amounts, especially when dealing with long-standing issues or complex customer histories.

3. Step-by-Step: Applying Payments and Credits

Follow these steps to correctly match transactions.

Here is a sample data structure for a payment application.

{
  "customer_id": "CUST-001",
  "transaction_type": "Payment",
  "amount": 500.00,
  "applied_to_invoice_id": "INV-2024-001",
  "application_date": "2024-10-25"
}

4. Resolving Unapplied Amounts

  1. 1

    Identify the Customer

    Go to ‘Sales’ -> ‘Customers’ in QuickBooks Online and select the customer profile that shows an unapplied amount.

  2. 2

    Locate the Transaction

    In the customer’s transaction list, find the ‘Payment’ or ‘Credit Memo’ that is marked as unapplied (it will typically show an ‘Open Balance’).

  3. 3

    Apply to Invoice

    Open the unapplied payment or credit. QuickBooks will usually prompt you to apply it to any open invoices for that customer. Select the correct invoice(s) and save.

Common Error: Incorrect Date Entry

Ensure the payment date is before or on the invoice date. Applying a payment to an invoice dated after the payment will cause discrepancies and may not clear the unapplied amount correctly.

5. Verifying Your Cleanup

Verification Checklist

  • Run an AR Aging Summary report and check for a decrease in unapplied entries.
  • Review individual customer balances for accuracy.
  • Confirm the specific unapplied transactions are now linked to invoices.
  • Ensure no new unapplied amounts were inadvertently created.

Need Help?

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Struggling to clean up your Accounts Receivable? Our expert team can help diagnose and resolve complex payment application issues.

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