How to Unreceive a Payment in QuickBooks

Accidentally applied a customer payment to the wrong invoice or entered the incorrect amount? It's a common mix-up that can throw your accounts receivable off balance, but fixing it in QuickBooks is straightforward once you know the steps. This guide will walk you through exactly how to unreceive a payment in both QuickBooks Online and QuickBooks Desktop, ensuring your records are accurate and your bookkeeping remains clean.

Why Would You Need to Unlink or Delete a Payment?

Before jumping into the "how-to," it’s useful to understand the common situations that require this fix. Correcting an error is about more than just deleting an entry; it’s about understanding what went wrong so you can maintain accurate financial records. You’ll typically need to unreceive a payment for one of these reasons:

• Applied to the Wrong Invoice: A customer with multiple open invoices sends a payment, and you mistakenly apply it to Invoice #101 instead of Invoice #102. Unlinking the payment allows you to re-apply it correctly.
• Applied to the Wrong Customer: You have two customers with similar names, like "Smith Co." and "Smyth Inc.," and you credited the payment to the wrong account.
• Incorrect Payment Amount Entered: Simple data entry errors happen. You might type a $500 payment as $50.00. You need to undo the initial entry to record the correct amount.
• Duplicate Payment Entry: You accidentally record the same payment twice, overstating your income and understating what a customer owes.
• The Customer's Check Bounced (NSF): If a bank returns a check due to non-sufficient funds (NSF), the payment never truly cleared. You must reverse the original payment transaction to show the customer's invoice is still outstanding and record any bank fees incurred.

In each case, the goal is the same: to return the invoice to its "open" or "unpaid" status and either correct the payment application, delete the incorrect payment, or re-establish the customer’s outstanding balance.

First, Check if the Payment is Part of a Deposit

This is the most important step before you do anything else. The process for unreceiving a payment changes depending on whether it has been electronically deposited or grouped with other payments in a bank deposit. Attempting to delete a payment already included in a deposit will cause reconciliation problems.

Here's how to check:

1. Find the payment transaction. You can do this by opening the invoice it was applied to and clicking the "payment made" link, or by going to the customer’s profile and viewing their transaction list.
2. Open the "Receive Payment" screen. Once you've opened the payment, look for information indicating a deposit. In QuickBooks Online, you'll see a "Deposited to" field. In QuickBooks Desktop, there's a "Deposit To" field on the form. If you can trace it to a specific bank deposit transaction, you must handle the deposit first.

If the payment is listed as going to "Undeposited Funds" or hasn't yet been grouped, your job is simple. If it's part of a larger, completed bank deposit, you have an extra step. We'll cover both scenarios below.

How to Unreceive a Payment in QuickBooks Online

QuickBooks Online makes this process fairly direct. Let's look at how to handle both deposited and undeposited payments.

Scenario 1: The Payment Has Not Been Deposited

If the payment is sitting in your "Undeposited Funds" account, you can easily unlink or delete it. This is the simplest fix.

To Unlink the Payment (Leaves a Credit for the Customer):

1. Navigate to Sales on the left-hand menu and select the Customers tab.
2. Find and select the customer whose payment you need to adjust.
3. From their transaction list, find and open the payment you want to unapply. This will open the Receive Payment window.
4. On the right side of the screen, under "Outstanding Transactions," you'll see the invoice the payment is linked to. Simply uncheck the box next to that invoice.
5. Double-check that the "Amount Received" is now fully "unapplied."
6. Click Save and Close.

This action removes the link between the payment and the invoice, marking the invoice as "unpaid" again. The payment itself now exists as an open credit on the customer's account, which you can apply to the correct invoice later.

To Delete the Payment Entirely:

If the payment was entered in error (e.g., it was a duplicate), you should delete it instead of leaving it as a credit.

1. Follow steps 1-3 above to find and open the payment transaction.
2. At the bottom of the Receive Payment screen, you’ll see a black bar with more options. Click on More.
3. From the dropdown menu, select Delete.
4. QuickBooks will ask for confirmation: "Are you sure you want to delete this payment?" Click Yes.

This permanently removes the payment from your records. The invoice it was previously applied to will revert to its "unpaid" status.

Scenario 2: The Payment Has Been Deposited

If the payment is part of a deposit, QuickBooks protects your bank reconciliation by preventing you from deleting the payment directly. You must first remove it from the deposit.

1. Find the Bank Deposit. Go back to the customer’s payment transaction. On the upper-right corner of the Receive Payment screen, click the blue link showing the deposit date and amount. This takes you directly to the Bank Deposit transaction.
2. Edit the Deposit. You are now viewing the deposit that contains the problematic payment. Click Edit at the top right.
3. Unlink the Payment from the Deposit. In the "Select the payments included in this deposit" section, find the specific payment you need to remove. Uncheck the box next to it.
4. Review the Deposit Total. Notice that the total deposit amount at the bottom right has now been reduced. This is correct. Ensure everything else in the deposit is still accurate.
5. Save and Close. After saving, QuickBooks will warn you that changing the transaction may affect your reconciliation. That's okay—it's what we want to do. Confirm the change.

By saving the deposit, you’ve successfully sent the payment back to the "Undeposited Funds" account. From here, you can now follow the steps in Scenario 1 to either unapply it from the invoice or delete it completely. The invoice will be open again, and your bank deposit amount will be correct, protecting your next bank reconciliation.

How to Unreceive a Payment in QuickBooks Desktop

The workflow in QuickBooks Desktop is similar in principle, though the clicks and screens look different. Again, the key is to determine if the payment has been deposited.

Scenario 1: The Payment Has Not Been Deposited

If the "Deposit To" field on the payment form says "Undeposited Funds," follow these steps.

To Unlink the Payment:

1. Go to the Customer Center and select the customer involved.
2. In the "Transactions" tab for that customer, find and double-click the payment to open the Customer Payment window.
3. In the middle of this window, you will see a list of invoices with a checkmark next to the one the payment was applied to. Click the checkmark to remove it.
4. This unapplies the payment. Before saving, double-check that the "Amount" at the top of the form now shows as an "Unused Credit."
5. Click Save & Close. The invoice is now unpaid, and a credit exists for that customer.

To Delete the Payment Entirely:

1. Open the Customer Payment window as described above.
2. With the transaction open, go to the top menu bar, click Edit, and then select Delete Payment from the dropdown menu.
3. Confirm your decision by clicking OK when QuickBooks asks if you’re sure.

Scenario 2: The Payment Has Been Deposited

Just like in QBO, you must first edit the deposit to release the payment. Deleting the deposit temporarily moves all associated payments back to Undeposited Funds.

1. Find the Deposit. Open the payment transaction. At the top of the Customer Payment form, there's often a memo or link indicating which deposit it's part of. Alternatively, you can go into your Chart of Accounts, open the bank account register, and find the corresponding deposit date and amount.
2. Open and Delete the Deposit. Double-click the deposit transaction from the bank register to open it. With the deposit on-screen, go to the Edit menu at the top of the software and click Delete Deposit.
3. Confirm the Action. QuickBooks will display a pop-up warning that you are about to delete a deposit and the included payments will be returned to Undeposited Funds. This is precisely what you need to do, so click OK.

Now that the deposit is deleted, the individual payments are unlinked and available for editing. You can follow the steps from Scenario 1 for QuickBooks Desktop to unapply or delete the incorrect payments. Once done, you can then go to Banking > Make Deposits and re-create the deposit with the corrected group of payments.

Final Thoughts

Correcting payment errors in QuickBooks boils down to a clear, logical process: first, locate the payment and determine if it's connected to a closed bank deposit. If it is, handle the deposit first to release the payment, then you are free to either unapply the payment from the invoice to create a credit or delete the mistaken transaction entirely.

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