QuickBooks Invoice Operations ยท Desktop & Online
How to Mark an Invoice as Paid in QuickBooks (Desktop and Online)
An invoice in QuickBooks stays open until a payment is received and applied against it. Manually marking it as paid is the wrong framing. The correct process is recording a payment and letting QuickBooks match it to the invoice. This distinction matters because it keeps your AR aging accurate, your bank reconciliation clean, and your cash flow reports reliable. This guide covers the three payment recording scenarios: customer check or cash, online payment via QuickBooks Payments, and credits or write-offs for uncollectible balances.
Receive Payment in QuickBooks Online
Use this when a customer pays by check, cash, bank transfer, or any method outside of QuickBooks Payments. This is the most common scenario.
Click the + New button in the top left. Select Receive Payment.
Select the Customer from the dropdown. QBO will show all outstanding invoices for that customer.
Enter the Payment date, Payment method (check, cash, ACH, etc.), and Reference no. (check number, transaction ID).
Select the Deposit to account. Choose Undeposited Funds if you plan to batch deposits, or the specific bank account if depositing immediately.
Check the box next to the invoice(s) this payment covers. If the payment is partial, enter the actual amount received in the Payment column.
Click Save and close. The invoice status changes from Open to Paid.
Undeposited Funds Tip
If you selected Undeposited Funds, remember to create a Bank Deposit later (+ New > Bank Deposit) to move the payment into your actual bank account. Undeposited Funds is a holding account, not a final destination.
Receive Payment in QuickBooks Desktop
QBDT uses the same conceptual flow but the menu structure differs. Works in Pro, Premier, and Enterprise.
Go to Customers menu > Receive Payments.
Select the customer from the Received From dropdown. Outstanding invoices appear automatically.
Enter Amount, Date, Payment Method, and Check # if applicable.
Click the checkmark next to the correct invoice(s). Verify the amount matches.
Click Save & Close. If using Undeposited Funds, create a deposit later via Banking > Make Deposits.
Apply a Credit Memo or Write Off an Uncollectible Invoice
When a customer will never pay and you need to close the invoice without a payment. This is a bad debt write-off.
Create a Bad Debts expense account in your Chart of Accounts if one does not exist (Account type: Expenses, Detail type: Bad Debts).
QBO: Create a Credit Memo for the customer, with the Bad Debts account as the line item, for the full invoice amount. QBDT: Use Credit Memo/Refund from the Customers menu.
Go to Receive Payment for the customer. The open invoice and the credit memo will both appear. Apply the credit to the invoice.
The invoice status changes to Paid, the bad debt expense appears on your P&L, and the AR aging is clean.
Tax Tip
Bad debt write-offs are deductible only if you use the accrual accounting method. Cash-basis businesses cannot deduct bad debts because the income was never recognized. Confirm with your CPA which method your business uses before writing off receivables.
Match a Bank Feed Transaction to an Open Invoice
When the payment has already landed in your bank account via the bank feed but the invoice is still showing as open.
QBO: Go to Banking (or Transactions). Find the deposit in the bank feed. Click Find match.
QBO will show matching invoices, payments, and deposits. Select the open invoice that corresponds to this deposit.
If the amounts match, click Match. QBO will create the Receive Payment entry and close the invoice simultaneously.
If the amounts differ (partial payment or bank fees deducted), use Record as transfer or create a separate journal entry for the fee difference.
Related QuickBooks Invoice Guides
Stuck on AR cleanup, undeposited funds, or bad debt write-offs?