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Accounts Receivable Part 1: How to Add a Customer in QuickBooks

Today I am jumping into a new series on Accounts Receivable in your business. I would like to start off at the beginning by showing you how to add a Customer in QuickBooks. Many businesses do not use the Customer functions in QuickBooks due to their business (retail for example) where this information isn’t very important. However, if you have a business where a Customer will be paying you at any point beyond when the transaction occurs, then you will want to hear me out in this post. I will explain why you need to use Customers in QuickBooks, the difference between a Customer and a Job and why this is important, and how to add a Customer in QuickBooks.

Why You Need to Use Customers

Customers are one of the least-used types of entities in QuickBooks. Businesses that don’t use Customers typically fall into the following categories: their customers pay when they receive the product, or they manage their receivables outside of QuickBooks due to a lack or knowledge or sheer volume of customer transactions. For the former, there may not be a need to track customers, but for the latter, unless you are a very large company (in which case you are probably not my audience), let me ask you to consider how Customers can benefit you in QuickBooks.

Customers are people or businesses whom you provide services or products to who, in return, pay you money. Keeping track of this money falls under Accounts Receivable. When you have a receivable, you have an amount that is due to you from a Customer, which falls under a Current Asset for your business. Maintaining control and awareness of your Accounts Receivable balances and metrics is an important part of managing your business and cash flow. You need to have Customers in QuickBooks and know how to manage your Accounts Receivable for the following reasons:

  • Make sure you get paid – don’t lose track of money that is owed to you. You may not get paid 100% of the time, which is where Bad Debts come into play, but you at least want to do your part to make sure you don’t forget about money that is owed to you.
  • Know who owes you what – you can keep tally on a piece of paper or you can have another software program to help you out, but if you want to see all of your Customers and their balances in one place, integrated into your financials and accounting system, you need to get it set up in QuickBooks.
  • Analyze your Receivables – Are your credit terms to stiff (people don’t want to do business with you because you won’t offer a long enough term), are they too lax (are people waiting over 2 months to pay you), or are their other alternatives that you could try to collect money sooner (prepayment or early payment discounts, penalties for late payments, etc)? How will you know unless you bring it all together and run reports to analyze your business’ information?
  • Understand your Customers – find out if you are estimating prices and costs correctly by reviewing Customer history and transactions. Where are the ebbs and flows in your business and Customers?
  • Efficiency – QuickBooks is your one-stop shop to managing all of your receivables, deposits, transactions, and Customers – learn how to use it and make it work for you!

Customers and Jobs

Have I convinced you? If so, great! If not, keep reading and I am sure you will learn something anyway! Next up, you will need to jump into QuickBooks to follow along. Go to Customers –> Customer Center as shown below:

Customers –> Customer Center

The Customer Center Screen will show up like this:

Customer Center

You can see up in the top-left of the screen that it says “New Customer & Job” – let me explain what the difference is here. A Customer is the person or entity cutting you the check, and a Job is the entity, project, or type of work being performed that is being paid for by the Customer. A Customer is a standalone name in the Customer Center, whereas a Job has to be assigned to a Customer. I would recommend using Jobs for your Customers if you are doing work for two different businesses, but are being paid by the owner of those two businesses. Another example is a Customer subcontracting work through you for multiple customers of the Customer. This would result in a variety of Jobs, but one Customer paying you.

Now that we have that cleared up, we can move on to how to add a Customer in QuickBooks.

How to Add a Customer in QuickBooks

Let’s get down to it and figure out how to add a Customer. The first step is to go to the Customer Center as explained above. You will then need to select New Customer & Job –> New Customer:

Select New Customer & Job –> New Customer

If you are just starting with QuickBooks, you have the option to Add/Edit Multiple List Entries. I won’t go into this today, but for now just skip this as once you understand how to enter one, multiple customers shouldn’t be an issue for you. First, you will need to fill in the Customer Name and Opening Balance. If you are beginning your file and have a lot of open balances for your Customers, you may want to use the Opening Balance field as of the transfer date to QuickBooks, but I am more partial to entering all outstanding invoices over just the Opening Balance. You will also see the New Customer data entry fields and tabs, which I will explain tab-by-tab below:

  • Address Info – Enter the Company Name and/or Individual’s name. I like to enter all of the contact info as well because QuickBooks offers customizable reports for you to put contact lists together that will help you stay organized. Also, add emails for the billing email for the Customer as QuickBooks offers invoice emailing which may be beneficial and time-saving for you. The Addresses section gives you the option to bill to one address and ship to another. Keep this in mind as you will be sending invoices to one location but shipping the product to another.

    New Customer – Address Info

  • Additional Info – This screen allows you to add the Type of Customer, Terms, Sales Rep info, Preferred Invoice Send Method, and Price Level. I don’t have time to get into all of those details, and if they apply to your business then you will understand them anyway. But I would like you to at least add Terms for each Customer. Terms are credit terms you provide Customers who do not pay up-front. A typical term is 2% 10, Net 30. This means that if your Customer pays within 10 days, they take a 2% discount on the invoice total, but not if paid within 11-30 days. Net 30 means that the invoice is due no later than 30 days after the invoice date. Companies will often add penalties and/or interest after 30 days (as you would know if you have been late on rent or a telephone bill). I will go into Terms in a future post if you are wondering what terms you should use for your business and industry.

    Additional Info Screen

  • Payment Info – If you have a lot of accounts, this section will help out. If you have over 50 customers, it may be helpful to organize them through account numbers so that you can track payments, invoices, and accounts with each Customer more efficiently. I like an alphanumeric setup such as this for “ABC Company” sert up as “AB1000″ as this helps me isolate an account number but also recognize the name associated with it. You may also want to set a Credit Limit for each Customer. This will help you if you are going to ring up an invoice for a Customer and aren’t paying attention to their outstanding balance – you may want to put a hold on shipment or further services until they pay their outstanding balance down. The Preferred Payment Method allows you to enter Credit Card info into QuickBooks for payment of invoices.

    Payment Info

  • Job Info – The final tab for a new Customer has to do with particular jobs. This field is helpful for construction industries or software design industries, but I haven’t used it much otherwise. This is good for keeping track of estimates and bids for jobs that you have sent out.

    Job Info

Setting up a Job is the same as setting up a Customer, except you assign a Job to a Customer in the Address Info screen. If your Job is billed to another address other than the Customer’s address, consider whether this is a Job or another Customer.

Wrapping it up!

So there you go – that is how to add a Customer in QuickBooks! This is the start of the Accounts Receivable series where I will take you through all of the aspects of setting up and managing your Accounts Receivable in QuickBooks. Let me know if you have any questions, and if this has helped you out or if you have learned something, go ahead and share this with your friends!

Keep Reaching!

Mark

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