How to Record Customer Deposits in QuickBooks
A practical guide for service businesses that take customer deposits before work is complete and need cleaner invoices, payments, and bank matching.
This resource is educational. Ask your accountant about entity-specific or tax-specific treatment for deposits and retainers.
Short answer
Customer deposits should connect to the customer, invoice, payment workflow, and bank deposit. Duplicate deposits often happen when bank-feed deposits are added instead of matched.
Checklist
- Identify whether the money is a deposit, payment, or retainer.
- Connect customer payments to invoices when appropriate.
- Review undeposited funds before adding bank deposits.
- Match bank-feed deposits instead of duplicating them.
- Reconcile the bank account after deposits are recorded.
Common mistakes
- Adding a bank-feed deposit after already recording the customer payment.
- Leaving payments sitting in undeposited funds.
- Posting deposits to generic income with no customer detail.
- Not tying deposits back to the job or invoice.
Examples for service businesses
- A contractor may take a deposit before ordering materials.
- A landscaper may collect a start payment before installation work begins.
- A home-service company may collect partial payment before final invoicing.
Undeposited funds confusion
QuickBooks uses undeposited funds as a holding area before payments are grouped into an actual bank deposit. If that workflow is not reviewed, deposits can appear duplicated or missing.
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