Home > Articles > Home & Office Computing > Other Applications

  • Print
  • + Share This
This chapter is from the book

This chapter is from the book

The Accounts Payable Process

QuickBooks includes a flexible payable process. Your company can choose to use the purchase order and receive item transactions for controlling and monitoring costs and delivery, or you can skip these steps and create a bill to be paid later.

An important reason for using a vendor bill to record your business expenses is the ability to track the vendor’s bill reference number. If your vendor invoices you more than once for the same services or items, QuickBooks preferences for Bills includes the option to be warned about duplicate bill numbers from the same vendor.

If you created your data file using the Express Start option, you might need to enable the features discussed in the earlier section “Preferences That Affect Accounts Payable.” If you are ready to work in your own data file, make sure you have created your new file as Chapter 1 instructed.

Accounts Payable Transactions

Many of the accounts payable transactions use QuickBooks items. If you are considering using the accounts payable process for the first time, be sure to review Chapter 4, which discusses the use of items and how to set them up properly.

If you choose to use purchase order transactions, you need to create items. Items are a list of the products or services you sell to customers or purchase from vendors. The primary purpose of items is to perform the accounting behind the scenes and to automate the data entry process by prefilling descriptions, costs, and sales price on purchase and sales transactions.

Should you use items even if you do not plan to use purchase order or item receipt transactions? I recommend that you do, especially if you follow the instructions in the nearby tip. A powerful feature of items is that each time the item is purchased or sold, QuickBooks records the amount to the specific account(s) defined in the Add New or Edit Item dialog box. This reduces or eliminates potential errors created from recording the transaction to the wrong account when using the Expense tab of a purchase transaction.

How can items help you track your customer’s profitability? Many of the QuickBooks reports that provide profitability information are based on transactions recorded using items on the Items tab and do not provide the same information if the transaction is recorded using the Expenses tab.

For example, imagine that a home builder creates a budget for the project (using an estimate transaction) and wants to track actual versus budgeted expense. To take advantage of the many customer and job profitability reports, you must enter your expenses using the Items tab on an accounts payable bill (and use the same process for the Write Checks transaction), as Figure 7.11 shows.

Figure 7.11

Figure 7.11 Use the Items tab to record expenses you want to track in customer or job profitability reports.

Table 7.1 lists the transaction types available in accounts payable and the purpose each type serves. Also review Table 8.1 on page 273 in Chapter 8, which outlines the accounting that goes on behind the scenes with these same transactions.

Table 7.1 Accounts Payable Transactions

Accounts Payable Transaction Name

Primary Purpose of Transaction

Purchase Order

Document a buyer issues to a seller indicating the products or services, quantity, and amounts the buyer has agreed to pay

Item Receipt (receiving inventory, non-inventory, or other item recorded on a purchase order)

Records receipt of inventory, non-inventory items, or other item types when the goods arrive before the vendor’s final bill

Enter Bills

Records an increase to accounts payable and the associated expense

Vendor Credit Memo

Records a decrease of what is owed to a vendor

Bill Payment Check

Pays the vendor bill and decreases accounts payable and cash account balances

Accounts Payable Workflow

In this section, you learn about the importance of using the accounts payable process in place of using the write check transaction type for recording business expenses. The QuickBooks Home page and Vendor Center, shown in Figures 7.1 and 7.5, respectively, make managing all your purchasing activities easy.

Your Home page workflow might vary, depending on the version of QuickBooks you are using and the preferences you have enabled.

To perform typical vendor-related activities from the QuickBooks Home page (see Figure 7.1), follow these steps:

  1. Access the Vendor Center.
  2. (Optional) Create a purchase order to the vendor.
  3. (Optional) Receive inventory with or without the final vendor bill.
  4. Enter bills against inventory (does not create an item receipt).
  5. Enter a bill to the vendor.
  6. Pay the bill (typically within the agreed-upon payment terms for that vendor—for example, 30 days from the bill date).

Some companies choose not to use accounts payable transactions, but instead pay their vendors via the check transaction (from the menu bar, selecting Banking, Write Checks). Often this choice is made because the process of paying a vendor with a check is quick and easy and takes fewer steps than creating and paying a vendor bill.

However, by choosing not to use accounts payable transactions, you ignore several important controls for managing the purchases your company makes. These purchasing controls include the following:

  • Associating the bill with the purchase order (or item receipt) to automatically calculate quantity and cost—When you enter the vendor’s name on a bill or write a check, QuickBooks prompts you with an open purchase order (or item receipt) dialog box (see Figure 7.12) and prefills the bill for you.

    Figure 7.12

    Figure 7.12 This warning displays when you enter a bill for a vendor that has an open purchase order.

  • Receiving a warning when entering a vendor invoice number twice—It can happen—or, more likely, the user might inadvertently enter it twice. However, when you use a vendor bill (versus the Write Checks transaction) and you enter the vendor’s invoice number in the Ref No. field, QuickBooks warns you if the vendor’s reference number appeared on a previous bill (see Figure 7.13).

    Figure 7.13

    Figure 7.13 QuickBooks provides a warning message when you enter a bill with the same reference (vendor invoice) number.

  • Not recognizing costs in the month they were incurred—When you opt to use the Write Checks transaction instead of a vendor bill, QuickBooks uses the date of the check as the date the expense is recorded (recognized). How often do you pay the vendor’s bill the same day or month you receive it? You might be overstating or understating the expenses incurred in a specific month if you use the check instead of the bill transaction type.
  • Taking advantage of discounts offered by your vendor—Only if you use vendor bills can you set a preference to have QuickBooks automatically calculate and record the discount if you are paying the bill within the vendor’s discount terms.

The purchasing controls and warnings in QuickBooks make using the accounts payable process a smart choice for your company. Additionally, your company benefits from having financial statements that can be viewed in both cash and accrual basis.

Entering a Purchase Order

Your business might choose to record purchase orders to track the expected product or service cost. Purchase orders are nonposting, which, in accounting vernacular, means that when you record a purchase order, you are not recording an expense or liability. Instead, a purchase order serves as a reminder that you expect to receive a bill from the vendor at a later date.

Recording Vendor Bills

You are on your way to properly using accounts payable transactions to help track and report on your business expenses. You learn how to enter your vendor bills in this section.

The ribbon toolbar at the top of the transaction window includes access to commonly used transaction features that were hidden or hard to find in previous editions of QuickBooks. The ribbon toolbar on an Enter Bill transaction includes the following tabs:

  • Main—Use this tab to access the following:

    • Browse or search saved vendor bills or credits using the arrows.
    • Create, save, delete, copy, or memorize vendor bills. The Save option on the ribbon toolbar keeps the transaction open. You’ll still use Save & Close or Save & New at the bottom of the dialog box after you complete your transaction.
    • Print the vendor bill. You might do this to provide details to a sister company that is paying the bill or when you need management’s approval before paying.
    • Attach source documents. This is a free service and offers local document storage on your computer.
    • Select PO or Enter Time to autofill the vendor bill with stored information from these transaction types.
    • Clear Splits removes the line detail on the Expenses or Items tab but retains the vendor name, date, and other information on the header portion of the vendor bill.
    • Recalculate updates the Amount Due field, which is helpful when you have additional line items.
    • Pay Bills opens the Pay Bills dialog box with Filter By selected for the same vendor displayed in the transaction and the bill marked ready to be paid.
  • Reports—From this tab on the ribbon toolbar, access a variety of reports specific to this type of transaction.

Recording Vendor Credits

Now that you are recording your business expenses with vendor bills, what about returning a product to the vendor or receiving a credit for a service that was not performed to your specifications? The next section shows you how easy it is to create a vendor credit.

This vendor credit is currently unapplied and available to be applied when you record a bill payment. If you know that a vendor has an unpaid bill pending, you can either apply the credit against that bill now or wait until the next time you need to pay the vendor.

If you want to view this unpaid bill on a report, select Reports, Vendors & Payables, Unpaid Bills Detail report from the menu bar. An unapplied credit then is listed in this report, as Figure 7.17 shows.

Figure 7.17

Figure 7.17 The Unpaid Bills Detail report makes it easy to see open vendor credits.

Paying Vendor Bills

One of the benefits of entering vendor bills is that you can record the expense during the month you incur it but pay the balance at a later date.

If you are ready to pay your bills, make sure you have a vendor bill or some record of the expense being incurred. Develop a process at your business for accurately reviewing your unpaid bills.

You have now learned how to complete basic accounts payable tasks, including using bills to record your expenses and preparing the payment for the vendor. In the next sections, you learn how to work with vendor discounts and credits.

Applying Vendor Credits

Your vendor might offer discounts for timely payment or issue a credit for products or services that did not meet your expectations.

Continue your QuickBooks practice by applying the vendor credit created in an earlier practice section “Recording Vendor Credits” of this chapter.

If you are an accounting professional using QuickBooks Accountant or QuickBooks Enterprise Accountant, you might want to use the Client Data Review feature. From one convenient window, you can assign the vendor unapplied credit memo to the open accounts payable bill, replacing the previous steps numbered 3–8.

Taking Discounts on Vendor Bills

Your company might be able to save money by paying vendors within their allowed discount terms. Some vendors offer discounts to encourage quick payment of their invoices.

If you are going to assign discounts to your vendor bills, record your bills at the “gross” amount, or total amount before any discount. Then, over time, you can watch the amount you have saved grow.

  • + Share This
  • 🔖 Save To Your Account

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020