Properly entering Sales Commission income and categorizing

Hi there, LynnBea!

Thanks for joining us here in the Community! Qbteachmt is one of the best Allstar (accountant) contributors here, and the answer provided is on-point and correct. Allow me to add up some information specifically to your questions.

Though both pertains to tracking commissions in the program, the poster's concern is a bit different from yours. He wanted to enter sales commissions, while you need to record commission checks from vendors.

Specifically to his concern, @qbteachmt thoroughly explained and suggested to use invoices or sales receipts instead of checks. You're correct; invoices and sales receipts only apply to customers and sales transactions. 

Since you'll want to record the vendor's side, you don't need them. Writing checks is still the best option for you. 

Generally, as part of the program's data workflow, the Undeposited Funds account is where you keep the checks. Once you're ready to put them all together in the bank's register, just deposit them. 

Ideally, all checks must automatically show in the Make Deposit window. Therefore, you should see a list of them right away. 

If your clients pay the commissions of the vendors, you can make it billable to them. The steps below can guide you through the process. 

First, create a bill for the vendor:

1. Go to Vendors at the top menu bar, select Enter Bills.
2. Enter other necessary details. 
3. Add the commission expense under the Expenses column.
4. Select a customer in the Customer: Job drop-down. 
5. Click Save and Close. 

Second, invoice the customer for the commission:

1. Go to Customers at the top menu bar, select Create Invoices.
2. Enter the name in the Customer: Job field. 
3. Choose the Select the outstanding billable time in the Billable Time/Costs box.
4. Click Ok.

Once you receive the payment from the customer, record it in the Receive Payments screen:

1. Go to Customers at the top menu bar, select Receive Payments.
2. Enter other necessary details.
3. Click Save and Close. 

Lastly, to pay the vendor for the commission:

1. Go to Vendors, then Pay Bills. 
2. Choose the Bill you've created.
3. At the bottom part, select Check as the Method. 
4. Click Pay Selected Bills. 

Check out these articles for more details:

• Track job costs in QuickBooks Desktop
• Pay bills in QuickBooks Desktop 

These resources should guide you through the process. If you have questions, or for anything else, feel free to leave me a response below. I'll be around!

"I can't enter an invoice or a sales receipt for an entity on my vendor list. Invoices and Sales receipts only apply to Customers, correct?"

Anyone who pays you is your Customer. A Vendor can be both a vendor name and a customer name for the financial activities between the two of you, and you must Honor and use the right name for each function, as if that is two different entities.

You pay and report vendors for goods and services, for 1099-Misc. Not the Customer Name.

Customers pay you for sales of goods and services, and the commission income is paid to you by a customer name. Not the Vendor Name. Yes, you would use invoice or sales receipts.

Thanks! I knew this at one time, but had forgotten, lol. That's my solution!

@wp318

You asked your Own topic, and in fact, Multiple times. I recommend you go here:

https://quickbooks.intuit.com/community/About-QB-Community/Setting-up-a-company-file-for-an-insuranc...

HI - follow up question on your statement below regarding anyone who pays you is a Customer. In my case, we have an agent that pays us commission on sales they made on certain customers. The previous bookkeeper records it as a deposit and I understand from above replies that this is the 'banking' side of it, and not the transactional. I want to record this properly going forward.

To clarify, I should create a new Customer name under our Agent name, is that correct? Then the process would be as I receive a notification of commission income, I will accrue in QB (either with a journal entry: Debit Commission Receivable, Credit Comm. Income)  and then when payment comes in, I receive it against Commission Receivable.

Thanks for all your help.

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@qbteachmt wrote:

"I can't enter an invoice or a sales receipt for an entity on my vendor list. Invoices and Sales receipts only apply to Customers, correct?"

 

Anyone who pays you is your Customer. A Vendor can be both a vendor name and a customer name for the financial activities between the two of you, and you must Honor and use the right name for each function, as if that is two different entities.

 

You pay and report vendors for goods and services, for 1099-Misc. Not the Customer Name.

 

Customers pay you for sales of goods and services, and the commission income is paid to you by a customer name. Not the Vendor Name. Yes, you would use invoice or sales receipts.

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I am hopping into this older thread because it is covering a workflow that I use daily, and which I have amended and modified over time.  In answering your now 2 year old question let me state that I am in the Literary Agency business, we receive payments from publishers, withhold our commission and then pay our author clients their net proceeds.  Here's what I do:

1. create a customer account for each publisher we work with, and a job beneath each publisher for each author

2. create an income item for company commission

3. create a short-term liability item for the funds due to client

4. create an invoice for that publisher:author where I have an income line for our commission, a line for any of our individual agents who have a piece of that project, and then the liability due to the author.

5. create a new vendor giving it the name "author"PMT and charge the corresponding short-term liability account for the amount payable

This process makes it easy to find any errors in my entry, and it allows me to check that the amounts payable are always properly allocated because every liability account should generally be 0.00 unless I am in the middle of the workflow.

Here's an example:

Joe Smith is owed $100 from Publisher X.

My commission is 15%

1. create invoice to PublisherX:Joe Smith 

line 1 MY COMMISSION (income account) = $15

line 2 CLIENT FUNDS DUE (author specific short-term liability account) = $85

2. create a bill to Joe Smith PMT 

line 1 CLIENT FUNDS DUE (author specific short-term liability account) = $85

3. receive payment to the specific invoice

4. pay client bill 

This process shows that income account increased $15, client liability account increased $85 and then decreased $85, and results in an invoice, bill and check which I can track.

Now I have a question for the QB world.  I am looking to amend my work flow to now include a second bank account in the process.  The new process will be:

1. funds deposited into account A

2. client paid from Account A

3. commission earned transferred to Account B

When I am creating the invoice to the publisher is there a way to record the commission amounts so that they are both income and marked for transfer from Account A to Account B in one step in the invoice?  Is it possible to create an intermediate account that accrues funds to be transferred so that I can make a transfer on a regular basis instead of having to do one transfer per deposit?

This is the process if someone is selling your product and you are paying them a commission?  What about if you are selling products for someone and getting a commission?  example: OLG Lottery?  I sell lottery tickets and get a small commission but the sales are going into my register so I need to know how to make it so quickbooks knows that portion of the sale isn't mine only the commission I'm making is mine