One of the most common (and costly) mistakes small business owners make is accidentally duplicating income in their books. This usually happens when customer payments are not properly applied to existing invoices. At first glance, it might seem like a harmless oversight—but it can lead to inflated revenue, inaccurate reports, and overpaid taxes.
How This Mistake Happens
When you receive a payment from a customer, it’s essential to apply that payment to the appropriate open invoice in your accounting software. However, many users mistakenly deposit the payment as a new sales receipt or bank deposit without linking it to the invoice. This makes it appear as if the business earned revenue twice: once from the original invoice and again from the payment.
Real-Life Example
Let’s say you invoice a client for $5,000 in January. They pay you in February. If you create a bank deposit or sales receipt in February instead of applying it to the original invoice, QuickBooks might now show $5,000 in January (the invoice) and another $5,000 in February (the deposit). This results in $10,000 of income being reported instead of $5,000.
The Consequences of Duplicated Income
Overstated Revenue : Your income reports will show more revenue than you actually earned.
Tax Overpayment : You might pay taxes on income you never truly received.
Inaccurate Business Decisions : Misleading financials can affect budgeting, forecasting, and loan applications.
Unreconciled Accounts Receivable : Your books will show invoices as still unpaid, even though you received the money.
How to Identify the Problem
There are a few red flags that indicate you may be duplicating income:
A growing number of unpaid invoices even though clients claim they’ve paid
High income amounts that don’t match your actual bank deposits
Income spikes that don’t align with your workload or project schedule
Customer balances that never seem to clear
Run an ‘Open Invoices’ report in QuickBooks to see if there are invoices that should have been closed by now.
Fixing the Issue in QuickBooks
To correct the issue:
1. Find the unmatched payments : Look for deposits or sales receipts that should have been applied to invoices.
2. Void or delete those payments : Remove the incorrectly entered transactions.
3. Apply payments correctly : Use the ‘Receive Payment’ function to apply money directly to open invoices.
4. Reconcile your AR: Make sure all client payments are linked to invoices and your accounts receivable reflects accurate balances.
Preventing the Problem Going Forward
Use the correct workflow : Always enter payments through the ‘Receive Payment’ screen in QuickBooks.
Avoid creating unnecessary sales receipts or deposits : for invoice payments.
Train your team : If others help with bookkeeping, ensure they understand the correct process.
Schedule regular reconciliations : Review open invoices and undeposited funds monthly to catch any mistakes early.
How SkyBridge Bookkeeping Can Help
If you’re not sure whether this issue exists in your books, or you’re overwhelmed by fixing it, we can help. SkyBridge Bookkeeping offers professional cleanup services to identify duplicated income, clean up misapplied payments, and implement correct procedures going forward. We’ll help ensure your financial reports reflect your real income—and not a misleading version of it.
Final Thoughts
Duplicated income is more than just a bookkeeping error—it affects your taxes, your cash flow, and your confidence in your numbers. Taking the time to apply payments properly and clean up past mistakes can save you money and give you clarity. Don’t let something as simple as a misapplied payment distort your financial picture—reach out today and let’s make sure your books are telling the truth.
