Inventory and purchase order to suppliers - how to manage prepayment to supplier and have the inventory stock updated only after receipt of stock?

We can write checks to your supplier and track them using another current asset account to record prepayments for future goods or services, Evinna. I'd be glad to guide you in detail below.

To begin with, let's create a new account by following these steps:

1. Click on the Gear icon in the top right corner of your screen.
2. Select Chart of accounts.
3. Click on New button.
4. Choose the Current assets in the Account type, then pick Other current assets (OCA) in the Detail type.
5. Complete the necessary fields and select Save.

Then, you'll need create a check on it.

1. Click on the +New button.
2. Select Cheque from the options.
3. Enter the details for the check.
4. Choose the OCA account you just created in the Category details.

Once done, convert the Purchase order (PO) to a Bill by the moment you actually received it. Also, ensure that you enter the OCA account in the Category details section with a negative value. This will reduce the asset account to match the amount you owe after the prepayment. If you still have outstanding bill balance, just pay it accordingly.

Another way to record payments without affecting inventory quantities is to refer to this article: How to track Prepaid Inventory. While this article is based in the U.S., the information is still relevant and applicable to users in Singapore.

You can also run reports to check the status of your inventory and see how much stock you have on hand and help identify any potential shortage.

Have you successfully completed the steps I provided above? If you have further questions or clarifications, please feel free to click the Reply button and we'll respond to you as soon as possible.

Hi Ariell

Thank you for your advice.  However, we are pre-paying the supplier via bank transfer mode, therefore do we still select Cheque option under +NEW button?

Yes, you need to select the Cheque option, Evinna.

If you create a cheque, it will allow you to record your prepaid inventory and apply it to the bill once you receive the physical inventory from your supplier.

You can refer to this article for further guidance on how to accurately record payments to your vendor without affecting the inventory quantity on hand until you receive the items. Please know that while this resource is US-based, the same principles apply to Singapore: How to track prepaid inventory.

I've included this article to provide you with helpful insights on the products you buy and sell, as well as the status of your inventory: Use reports to see your sales and inventory status in QuickBooks Online (QBO).

Feel free to revisit this thread if you have additional questions. 

Dear Ariell

I would need further advice on the following directions you have provided as I don't quite understand:
"Once done, convert the Purchase order (PO) to a Bill by the moment you actually received it. Also, ensure that you enter the OCA account in the Category details section with a negative value. This will reduce the asset account to match the amount you owe after the prepayment. If you still have outstanding bill balance, just pay it accordingly."

Are you able to provide print screens/screenshots on what should we enter in the Bill when we convert the PO?  Because I tried the first step of creating a cheque as "prepayment to supplier"  - after this step, when i check my inventory item, the stock was added.  It no longer shows the "Qty on Purchase order"

Thank you.

I appreciate you for following the steps provided by my colleague above. To effectively reduce your stock level, please input the prepayment as a negative value, evinna.  

Adding a negative value to your Other Current Asset (OCA) account in the Bill section will adjust the balance, accurately reflecting the amount owed after the prepayment and ensuring that your financial records are accurate. To correct it, please follow the steps below:

1. Go to the + New.
2. Select Bills.
3. Add the necessary details.
4. On the Category details, add the Prepaid Inventory to the Category column.
5. Once done, add the negative value to the Amount column.
6. Then, enter your items.
7. After that, click Save and Close.

Once done, we'll have to pay the bill balance. Please follow the steps to do so.

1. Go to the + New.
2. Select Pay Bills 
3. Choose the correct Payment account and ensure to set the right Payment date.
4. Select the bill you created.
5. Once done, click Save and close.

I'm including this article to show you all your payments made to a supplier: Expenses by Supplier Summary report.

Please feel free to post in this forum if you need more help with this issue.

Dear SheandL

Thank you for the screenshots and directions.  After creating the Cheque >  I have done the Creation of Bill : 

1. On the Category details, add the Prepaid Inventory to the Category column. (with negative value to the Amount column).

With the above, total amount becomes $0.00.  After this step, i reviewed my product inventory : under Quantity on purchase order, it shows a blank (-).  However, the quantity from PO was not added to my current inventory quantity on hand.

So when I wish to "pay the bill" , there is no balance for the bill to be paid (no available bill to pay) because it was 100% prepayment to the supplier/purchase order.  And the quantity on PO did not get added to the quantity on hand.

sorry are you able to assist?