How to Enter a Discount in QuickBooks Online

Do you sometimes offer a discount to your customers or clients?

You may want to show that separately so you can keep track of the amount of discount you give, rather than reducing the price of the items you sell.

The discount feature can be turned on in “Account and Settings" under the gear icon in the top right.

A discounts account is created in yourchart of accounts

The discount box then appears on your invoices

And sales receipts

You can select to give a discount based on a dollar amount, or percentage of the total charged to your customer.

Any discounts given will be included in the income section of your profit and loss statement.

Do keep in mind what your costs are when offering discounts.  If you have sales people in the field tyring to make sales, it’s a good idea to have policies that help to protect your bottom line. Particularly at the moment, as costs are increasing, and things are changing quickly.

If you would like assistance to clean up your reports, and create reports that work well for your business, don’t hesitate to reach out.

— My Cloud Bookkeeping Courses

— Bank Reconciliation Checklist‍

— Small Business Month-End Checklist

— QuickBooks Online Plan Comparison

Video transcript

Hi, Kerry here from My Cloud Bookkeeping, do you sometimes offer your customers or clients a discount and want to keep track of that separately? There's a way that you can turn on the discount feature in QuickBooks online and track that discount amount separately. It's a really good idea just to monitor how much you're giving out in discounts, perhaps you aren't the only person granting the discounts and you'd like to see where they're going or how much they amount to on a regular basis. So we'll walk through those steps now.

So here we are in the sample company, and the first thing we need to do is turn on the discount feature. So we pop up here to the gear icon, go to account and settings, we select sales and here we have the option for discount and we can see it's turned off. So we click the little pencil and let's toggle that to on, and then we click save. Now, what QuickBooks has done in the background while we've done this, is create an account for us to record those discounts into. So let's have look at chart of accounts, and if we scroll down to the income section, we can see here, it's created an account called, Discounts Given, and let's create this in the income section so that when you're looking at your income statement, your profit and loss, you'll be able to see the income, the sales, and the discounts, all in the one area.

So now let's give somebody a discount and see how it works. It's going to pop up here, let's choose an invoice, and let's sell something to Cool Cars, going to invoice them for a design project for $50,000. Now, if you have a look down here, we have the option for discount percentage or discount value. Let's give them a 10% discount. So here we now have $50,000 invoice with a 10% discount, and the balance due is $45,000. Now there's an interesting thing here with sales tax. I'm going to click tax amount here and put that checkmark in so that it's going to calculate sales tax. We're just going to go with California just because it's there. And you can see that it's calculated the tax on the $45,000. Now there's an interesting thing that happens here, we can toggle this, and then it will calculate the tax on the before discount amount. Now I cannot imagine a scenario where you would be charging the sales tax before the discount, but if that is something you need to do, that is an option. It's a little difficult to read in there, but now it's telling you that the tax will subtotal is 45,000 and it's calculating the sales tax on the net amount, which I think would be quite the normal thing to do if I don't, yeah, as I mentioned, I have no idea when you would want to do that. So now we can save and theoretically, send that to Cool Cars.

You can also use the discount on a sales receipts. Let's pop out of this. We'll go up here and we'll open a sales receipt. A sales receipt is something you use when the sale and the payment happen at the same time. So as you can see the boxes are the same, except that we're also choosing where we're depositing the funds to. So we'll just grab our Cool Cars again, we'll give them a design service, maybe we won't, maybe we'll just sell them some lighting because they're here in the store and it's $500,and take off the tax, make things a little easier. And maybe this time we'rejust going to give them some dollars discounts. So we'll give them, I don't know, a $50 discount, it's 10%, same sort of thing, but you can see another way to use this. They will give you your $450, which you'll either pop into un-deposited funds and go to the bank later or if they're paying you by credit card, I might, you might be putting directly into your checking account and then we can save and send, save and print, do whatever we need to do with that one.

Now, if you're preparing an estimate for a client, you can pop into here, grab your estimate, and if you have a look, you still have this option to use the discount feature in here as well. So when that's accepted, discount will flow through for your invoicing. I have a different video on using estimates if that's something you'd like to explore further, but for discount purposes, it works exactly the same as the invoice and the sales receipt. Now let's have a quick look at the income statement, the profit, and loss and see what's going on in there. So we'll pop up here to reports, and will go to our profit and loss, and you can see here, we have design income. We have discounts given, we have other services, so we can see that the total income here is $55,650. It would have been over 60,000 if we hadn't given this discount. So you can keep an eye on the total discount that you're giving to your customers, make sure that you're covering off your cost of goods sold, and that you then have enough money left to cover all your operating expenses. This is really important that you're looking at this on regular basis.

The other thing to consider here is we don't have account numbers in the sample company, so it's doing everything in alphabetical order. I don't particularly like how this looks, if you wanted to change that around, you could add some numbers, you could organize things however you want it and hopefully, that would be a little bit more useful. But there we go, we can see we've given $5,000 discount on a total income of $55,000, so that's quite significant.

So do keep mind what your costs are when you'reoffering those discounts. Sometimes you'll have sales people in the field and they'll just be wanting to close the sale. You might need to have some strong policies around what discounts can be offered and when particularly during these tight times and with costs increasing quite significantly at the moment. So make sure you know what it's costing for what you’re selling, be they services or products, and what your margins are to be sure you're not discounting too much and you can still cover your regular operating expenses. Make sure you're looking at your reports on regular basis. Download the month-end checklist, it'll help to keep everything in order.

If this video is useful, I'd love to hear about it. Click like, subscribe to my channel and I'll see you again soon.

Cheers.