Why Is My Accounts Receivable Negative?

If your Accounts Receivable shows a credit balance, or the A/R Aging report lists clients with negative balances, those are almost always clients who have paid you ahead of time. The money is real, and QuickBooks is holding it on each client’s account until they use it.

Where the credit comes from

In MindBody, a client can put money on their account before they buy anything, for example a package paid in advance or a deposit toward a treatment. MindBody shows that as a positive account balance.

FlexBooks records that money in QuickBooks as a payment on the client’s account. Because there is no sale yet, the payment isn’t attached to an invoice, and QuickBooks shows it as Unapplied. The client’s balance in QuickBooks goes negative by the same amount, and so does your A/R in total.

What happens when the client uses it

When the client later spends their account credit in MindBody, FlexBooks creates an invoice for that visit, and QuickBooks uses the client’s credit to pay it. The client’s balance goes back to zero, and the income shows on your Profit and Loss on the day of the visit, which is the right day.

QuickBooks does this through a setting called Automatically apply credits, under Settings, then Account and settings, then Advanced, then Automation. It should stay on. With it on, QuickBooks applies a client’s credit to their oldest unpaid invoice first.

Checking that every credit is right

Each client’s credit in QuickBooks should equal their account balance in MindBody:

1. In MindBody, run the Account Balances report.
2. In QuickBooks, run the Customer Balance Summary report for the same date.
3. Compare client by client. The two systems show the same amount with opposite signs: a client with $500 on account shows as $500.00 in MindBody and -500.00 in QuickBooks.

If a client’s credit is in QuickBooks but not in MindBody, the most common reason is a past sale that was edited or removed in MindBody after it synced. See What Happens When Someone Edits a Past Sale in Mindbody?. If you can’t find the reason, send us the client’s name and we’ll look.

Showing client credits on your financial statements

Day to day, leave the credits where FlexBooks puts them, so they keep paying for the visits they’re meant for.

When your accountant prepares financial statements, they’ll usually show the total of these client credits as a liability, often called Customer Deposits or Unearned Revenue, rather than as negative receivables, because it’s money you owe your clients in services. Most accountants make that change in their year-end working papers. If yours would rather record it in QuickBooks, contact us first, because a journal entry to Accounts Receivable needs a line for each client and can interact with the Automatically apply credits setting.

Why FlexBooks holds prepayments this way

QuickBooks offers another way to hold a deposit: a liability account with a deposit item, which you then subtract on a later invoice. FlexBooks doesn’t use it, because QuickBooks can’t apply that kind of deposit to the client’s visit on its own, and your client balances in QuickBooks would no longer line up with MindBody’s Account Balances report. Holding the money on each client’s account keeps every prepaid credit visible by name and lets QuickBooks match it to the visit automatically.

If you report on a cash basis, these payments also appear on your Profit and Loss as Unapplied Cash Payment Income until they’re used. Handling Unapplied Payments explains that line.

For how account credit moves between MindBody and QuickBooks step by step, see How Does FlexBooks Handle Customer Account Balances?. For deposits that are meant to be returned, see Why Don't Deposits and Prepayments Show Up as Income?.