Have you ever pulled up your Profit and Loss and thought that the income number is higher than what I brought in? 😲

That one comes up a lot, and it usually is not a QuickBooks problem.

It is a doorway problem.

There are three different ways to record income in QuickBooks Online, and when you use more than one of them without a system, the same sale can land on your reports twice.

Your income looks bigger than it was, your bottom line looks better than it is, and you pay taxes on money that never showed up.

So let me walk you through all three, and then help you pick the one that belongs in your business.

Why Income Ends Up on Your Reports Twice

Everything you enter into QuickBooks lands on a report somewhere.

Your Profit and Loss is the one your tax professional reads, and it shows what you brought in at the top, your expenses underneath, and your bottom line at the end.

When a sale gets recorded twice, and nobody catches it, that report says you earned more than you did.

The bank feed is where this happens most.

You create an invoice, forget it is sitting there waiting, and then record the deposit again instead of matching it to the invoice you already made.

Undeposited funds is the other place it hides.

That is the holding spot QuickBooks uses for money you have received but have not taken to the bank yet, and transactions sit there quietly until someone goes looking.

If reading that report is the part that feels foggy, I put together The Importance of Your Profit and Loss so you can see what it is telling you. Click here to get your copy. 

 

The 3 Ways to Record Income in QuickBooks Online

Invoices.

You use these when you bill a customer and get paid later.

An invoice creates accounts receivable, which is a fancy way of saying someone owes you money.

It is a two-step process: you create the invoice, and then later you receive the payment and record the deposit.

 

Sales receipts.

This one tracks the sale and the payment together in a single transaction.

You still get your customer detail and your product detail, without the second step.

It is one of my favorites when you get paid at the time of service.

 

Bank deposit.

The simplest of the three.

You go straight to the income account you want it to show up on, or you enter it right from inside your bank feed. Fast, and the least detail.

Pick the door that matches how you get paid.

Whichever one you use, the income account behind it is what decides where the money shows up.

 

Why Products and Services Decide What Your Report Says

One thing worth knowing if you use invoices or sales receipts.

You are not choosing an income account on those forms; you are choosing a product or service, and that item is what carries the income account behind the scenes.

So your products and services list and your chart of accounts are doing the work together.

If your Profit and Loss has looked off for a while, that setup is the first place I would look.

 

Accrual or Cash Basis, and Why It Picks Your Method

Accrual means you count the income the moment you create the invoice.

Cash basis means you count it when the money lands in your bank.

That one answer narrows your choice for you.

Accrual businesses need invoices.

Cash basis businesses often find that invoices create a second step they never needed, and a sales receipt or a deposit keeps things cleaner.

If you do not know which one you are, check with your tax professional or pull up last year’s tax return and look.

 

How to Choose One Method and Stay Consistent

You only need one.

You can create an invoice one week and use the bank feed the next, and nothing breaks.

But what I have watched happen over and over is that the people who pick and choose without a system are the same ones who end up with duplicates and a cleanup on their hands.

So pick the method that fits how you get paid, and master it before you add another.

Start with whether you are accrual or cash.

Then look at how much time you want to spend entering transactions, because invoices carry the most steps, sales receipts sit in the middle with a lot of detail for less work, and a deposit or a bank feed entry is the fastest with the least detail.

 

 

Looking for another video in this series? Click the link below.
“Chart of Accounts: Why Yours May Be Wrong”
“QuickBooks Modern Reports Explained: The 3 Reports Every Business Owner Should Check”
“How to Enter Expenses in QuickBooks Online the Right Way”

 

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If you are reading this thinking…

I want to understand how these features connect to my reports instead of guessing my way through them, that is what I teach in my free Customizing QuickBooks workshop.

We start with what I call the end in mind.

Instead of opening QuickBooks and using features because they are sitting there, you decide what you want to see on your reports first, and then build QuickBooks around that.

It is also where I go deeper on undeposited funds, which is where a lot of doubled income hides.

Save your seat here: https://canduskampfer.com/learn

 

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Now I want to hear from you. Which of the three ways are you using right now, and is it working for you or making more work?

Tell me in the comments. ⤵️

#CandusKampfer