Why Don't Deposits and Prepayments Show Up as Income?

When a member pays you money up front, it doesn’t appear on your Profit and Loss. Instead it shows up in QuickBooks as a customer payment marked Unapplied, and that member’s balance goes negative. That is FlexBooks working as designed. Here’s why, and what you may want to do about it.

What counts as money paid up front

MindBody has several ways for a member to pay before they’ve received anything:

• Account credit. The member puts money on their account to spend on classes or products later.
• Contract deposits. A deposit charged when a member signs up for a contract, usually meant to be returned when they leave.
• Appointment deposits and event payment plans. Money paid toward something booked for later.

MindBody files all of these under its built-in Payments on Account category.

How FlexBooks records them

Every sale in that category reaches QuickBooks as a Payment on the member’s account, not as a sale. The money goes to the same place as the rest of that day’s card or cash sales, so your deposits still match your bank. But no income is recorded, because the member hasn’t received anything yet. In QuickBooks terms you are holding their money, so their customer balance is negative and your Accounts Receivable goes down.

From there, the two kinds of prepayment go different ways.

Money that gets spent becomes income on its own

When the member later spends their account credit in MindBody (the Account payment method), FlexBooks creates an invoice for the purchase, and QuickBooks uses the member’s credit to pay it. That’s the moment the income appears, which is the right moment.

This relies on a QuickBooks setting, Automatically apply credits, which is on in most companies. (You can check it under Settings, then Account and settings, then Advanced, then Automation.)

For the full picture of how credit and balances move, see How Does FlexBooks Handle Customer Account Balances?.

Money meant to come back never turns into income by itself

A contract deposit is different, because nothing ever spends it. It stays on the member’s account as money you owe them until something else happens:

• You refund it. FlexBooks records the refund, but the original payment still sits on the member’s account. Your bookkeeper will want to clear the two against each other.
• You keep it. Nothing reaches QuickBooks at all. The deposit stays there as money owed back, even though you’ve kept it.

What to do about it

How a deposit you keep should be treated, and when it becomes income, is a decision for you and whoever prepares your taxes. FlexBooks can’t make that call for you, so here are the common ways studios handle it:

1. Leave it as it is. If you refund deposits when members leave, showing them as money owed back is accurate. Your bookkeeper only needs to clear each refund against the original payment.
2. Move kept deposits into income periodically. Once a month or once a year, your bookkeeper records one journal entry for the deposits you’ve kept: it reduces each member’s credit and records the same amount as income. MindBody’s Sales by Product report, with Contract Deposits selected, lists every deposit you’ve collected.
3. Charge it differently in MindBody. If you’d rather deposits arrive in QuickBooks as sales, you can charge the amount as a contract registration fee with its own revenue category instead of a contract deposit. FlexBooks then records it as a sale, and you choose which account it lands in. The trade-off is that you lose MindBody’s deposit tracking, which shows you who you owe a deposit to.

If deposits you’ve already kept are sitting on members’ accounts, the same journal entry in option 2 cleans those up too. See also Handling Unapplied Payments.

If you’d like help working out which of these fits your studio, or setting one of them up, contact us and we’ll walk through it with you.