Bills in QuickBooks are a transaction reflecting what you owe to a vendor, sometimes referred to outside QuickBooks as vendor invoices. Ensuring complete and accurate entry of bills into QuickBooks can be a huge help in understanding and managing your business’ expenses. Let’s look at some of the basics of entering bills in QuickBooks, and the tools you can use for this process to make your work simpler.
How Do I Properly Enter a Bill in QuickBooks?
The Bills toolbar begins similarly to many transaction toolbars. You have "arrows" and a "find" button for navigating between previously entered bills, the standard "new"/"save"/"delete" buttons, and the options to create a copy or memorize a bill to automate entry of similar or identical bills. We can print bills and attach any related files, for example a PDF of the bill the vendor sent you that this QuickBooks transaction reflects. The select PO button allows you to create a bill based off a purchase order you’ve entered previously. This is the same screen you’ll see if you select a vendor on the bill who has an open purchase order.
Using this tool, you can select open POs for the chosen vendor by date, PO number, and memo field, and add them to the bill, saving time over creating the bill by hand, as well as creating a transaction link to see what has been received from said PO.
Enter Time on bills will likely see most of its use when tracking subcontractor time in QuickBooks. This allows you to pull in time entries for the vendor to the bill, using the service item from the time entry.
Clear Splits will remove everything you’ve entered on the bill’s item or expense lines and will move the total to a blank line on the expense line. This can be used to start over on allocating expenses if needed, without recreating the whole bill.
Recalculate will add up the totals of the Item and Expense tabs and change the bill total to reflect them. While these totals generally match, they can become unmatched depending on if the total or lines were entered first, and if things were added and removed during entry of the bill.
Pay Bill (last item on this toolbar) will take you to the screen to enter a payment for this or other bills, defaulting to show bills for this vendor.
The next part of the bill screen is the header. Here, you’ll select the vendor, which - if their information has been completely entered on the Vendor list - should pull in the address, default terms, and depending on your settings, possibly the class.
As with all transaction types in QuickBooks, make sure your date is set correctly when entering the transaction. QuickBooks will usually try to use the bill date plus the terms to set the bill’s due date for you. Always double check both dates, just to be sure.
A reference number isn’t strictly required; QuickBooks won’t auto-generate one, but it can be very useful for locating bills; and for most types of transaction imports and exports, should you ever need to create a new file from your existing data.
If you enter the "total amount due" in the header, QuickBooks will add this amount to a blank line on the expense tab awaiting assignment. If you need to split this, change the amount and click into another line. QuickBooks will try to prompt you with the difference on that next blank line. Remember that if your bill becomes out of balance by having the total not equal the items and expenses, you can recalculate" to have QuickBooks set the bill total to the total of the items and expenses.
How to Properly Manage QuickBooks Vendor Terms & Discounts
If you’ve set default terms on the vendor, they’ll be filled in when you choose the vendor for the bill. Otherwise, if they’re not set or you need to use some terms other than the default, you can select them in this field. As with most lists on transaction forms, you can add to this list on the fly - if needed.
"Class" is optional, and you may not even see it if you have yet to turn on the class tracking option. Class tracking is a way of creating custom subcategories to track aspects of your business, such as retail vs wholesale, different profit centers, etc. Classes will be detailed in a future blog post.
The "memo" field is a useful place to put any sort of note you need on the bill.
The transaction lines section for bills is split into two tabs. The "expenses" tab can be used to record expenses directly to expense accounts without using items. You have a memo field on each line to indicate details of what the expense was for. Depending on your preferences and the details entered during vendor setup, you may have certain accounts that pre-fill on the expense tab any time you create a bill for a vendor.
On the "items" tab, you enter items or services purchased, with their costs and descriptions being pulled from the purchase-side fields of items in your item list.
In either tab, you can designate a line item as applicable to a customer for job costing reports, and you can tell QuickBooks if this is a billable expense, one that you would like to charge the related client for. If this is checked, the line item will be available to add to an invoice using the "Add Time/Costs" button when creating the invoice.
How are Other Accounts Payable Transactions (like Credits) Recorded?
There are a few transaction types that are different from bills in a few ways but can also be accessed from the create bills screen. The first of these is the vendor credit.
You may have noticed the bill/credit radio buttons above the bill header. When "Credit" is selected, this changes the transaction from a bill to a vendor credit, indicating that the vendor owes you. These can be used to record returns to the vendor, promotional credits, or other scenarios in which a vendor is reducing the amount you owe.
You’ll notice the header for vendor credits is simpler than the one for bills. You’ll still select the vendor, of course, and - as with all QuickBooks transactions - the date. And much like a bill, you can enter a reference number, memo, or class, for easier tracking and notation. If the vendor is sending you a check or otherwise giving funds back, that gets a little more involved. You enter the credit as usual, then you record a deposit from that vendor for the same amount from Accounts Payable and can link the credit and deposit in Pay Bills.
Aside from the differences in the header, entering a vendor credit is essentially the same as entering a bill. You still have expense and item tabs, with all the same fields. One important thing to note is that items put on a vendor credit are assumed to be returns and are placed back into inventory. If, for any reason, you need to put items on a vendor credit that will not be returned, you may need to enter an inventory adjustment to compensate. Check with an accounting professional if you’re not sure.
How Do I Account for Inventory in the Accounts Payable Workflow in QuickBooks Desktop?
Another type of related transaction that you can enter from the bills screen is an Item Receipt. This is used to show that you’ve received inventory but haven’t yet been billed for it. It enables you to make sure inventory is added into the system when you receive it, for accurate counts, and worry about the bill when that comes in.
The item receipt is activated by unchecking the “Bill Received” box above the bill header. The header for this is, again, simpler than a regular bill. Once the bill is received, there’s no need to enter a separate transaction for it. In fact, that could result in doubling up your inventory received. Instead, if you’ve entered an item receipt to reflect incoming inventory, you can pull it back up when the bill arrives and re-check the “Bill Received” box. This tells QuickBooks that the bill has come in for these items, and it converts the item receipt transaction to a full bill hitting Accounts Payable, without entering the inventory again.
What this means is that the Item Receipt and the Bill are different states of the same transaction. Therefore, if you change the transaction date from the date of inventory receipt to the bill date when converting it to a bill, it will change the date the items were received as well, which can cause issues with the inventory count suddenly changing, potentially leading to issues with negative inventory or build assemblies becoming pending. An effect of leaving the original item receipt date may be that your terms for that bill could be calculating unexpectedly, as the vendor may be using the bill date to calculate terms instead - as opposed to the original item receipt date QuickBooks is calculating the terms off of.
You can either set discounts manually when paying the bill, using the memo field as a reminder, or choose to change the date to the date of the bill to resolve this terms issue, but as mentioned that will cause issues with the inventory count dates. If you do change the bill date, you’ll have to enter an inventory adjustment that puts those items into inventory on the item receipt date, and another that removes the extra set that the bill puts in.
Which you prefer is up to you and will likely depend on how often this scenario of both a split bill/delivery date and a discount terms comes up. If split bill/delivery dates are very common for you, you may consider Enhanced Inventory Receiving, which splits the item receipts and bills into distinct transactions with their own dates, though this is only to be turned on with extreme caution.
How Do I Make a Proper Bill Payment in QuickBooks?
Now that we know the ins and outs of the bills window, let’s look at paying those bills. The "Pay Bills" window can be accessed from any bill, or directly from the "Vendors" menu or the "Vendor Center."
The top section of the pay bills window is where you’ll filter down the list of bills you see for payment. You can see bills of any date range or limit it to those due on or before a specific date. You can filter to show bills from just one vendor or all. If you enter the pay bills screen from a bill, you will by default see only bills for that vendor. Otherwise you’ll start with the list showing bills for all vendors and can filter down from there. You can choose to sort the bills by Vendor (if filtered for all vendors), the amount due, the due date, the reference number, or other criteria.
How Do I Best Pay a Vendor Bill with Vendor Credits?
The next section is for discounts and credits that may be applied to a bill. We also have a button which will bring up the currently highlighted bill for us, in case more detail is needed before entering the payment. In the middle, we see the terms of the selected and checked bill, as well as any suggested discount QuickBooks may calculate based on the terms. To change this discount or add one that is not based on the terms, you can click the “Set Discount” button. This will bring up the "Discounts and Credits" window to the "Discount" tab.
Here, you can see the discount date (if any) that QuickBooks has calculated based on your terms, what terms the bill is using, and the suggested discount. Below that, you can set the discount amount manually, as well as choosing the discount account and the class - if applicable.
On the far right of the "Discount and Credit" area of the "Pay Bills" screen, we can see the number and total value of any unapplied credits from this bill’s vendor. Clicking the “Set Credits” button will bring up the same Discounts and Credits window as before, only it is now showing the "Credits" tab by default.
Here we can choose any previously entered vendor credits to apply to the bill, reducing the amount owed. Check the credits to apply, and the amount of that credit to use if it’s not the full amount. If you’ve mistakenly gotten incorrect credits checked or amounts set as you go through this, you can use the Clear button to uncheck everything. Transactions you’ll see here are usually vendor credits, but in some cases, you may see other transactions that reduce your Accounts Payable balance for that vendor, such as checks or journal entries.
In the bottom section, we can set the date of the bill payment. Keep a close eye on this, as with any dates in QuickBooks, to ensure it’s correct. Besides making sure your data matches what happened “in real life” as closely as possible, a correct payment date helps make sure QuickBooks is correctly calculating discounts on any terms that have them.
You’ll then select whether this is a payment by check, credit card, or online bank payment, and the account that you’re paying the bill or bills from. Once everything looks correct for this payment, click “Pay Selected Bills” at the bottom of the screen. This will bring up a payment summary window, showing the bill or bills paid, as well as the date, account, and payment method.
From here, if you need to pay more bills in other payment transactions, you can hit “Pay More Bills” to be returned to the "Pay Bills" window. If you need to print any of the checks you just created, you can choose “Print Checks”. If you’re all finished, click “Done”. And that’s the basic workflow of bills, from entry to payment.
You can get even more out of your accounts payable with features such as the Bill Tracker and the many built-in vendor reports; so, get in and have a look if you haven’t yet. A solid grasp on the basics of bill entry in QuickBooks can empower your business to succeed, by allowing you to get a clear and accurate picture of what you owe and when it was or will be paid, which lets you get a clearer picture of your business’ financial health.