Unapplied Cash Payments in QuickBooks
You are running your reports at the end of the month, and come across an odd account on your P&L. Maybe your accountant asked about it, maybe it just stuck out like a sore thumb. Unapplied Cash Payments in QuickBooks are a funny animal. There seems to be a number there, and if you don’t know what it is, it takes way more time than necessary to fix!
Unapplied Cash Payments are the net result of posting a payment before the date the actual invoice occurred. They occur exclusively in Cash Basis accounting since your Accrual based reports would match the income on the invoice to the date of the invoice by default (unless you have a fancy-dancy revenue recognition app connected to your QuickBooks).
The fix is incredibly easy, but you will want to take care that they don’t affect any tax reports, such as sales tax reporting, etc, as they commonly are found months after the offending transaction occurs.
Let’s run through a scenario. Below, we are invoicing Puppy Paws, LLC, for pet sitting services. The invoice appears pretty innocuous, right? That’s because it is. There is no issue yet.
We then receive a payment from Puppy Paws in December. Unfortunately, we have not had enough coffee, and accidentally enter the payment with a date in November. Unless we are time travelers, the chances of this timeline being accurate are slim!
The major issue is that the date of payment occurs prior to an actual invoice being issued. Therefore, as of the typical financial statement for November, the invoice does not actually exist yet. QuickBooks doesn’t know what to do with this, so it creates a phantom account called “Unapplied Cash Payment Income.”
Seeing what occurred, and seeing the name of the account, it now makes sense! We go back to the payment and fix our typo, and all will be well.
If you need additional help with Unapplied Cash Payments in QuickBooks, or would like to schedule a quick session with a member of our team, book a complimentary slot on my calendar here, or check out our contact page.
