How to account for an early pay discount from a vendor?

Good morning, @Apples521.

Thanks for reaching out to the QuickBooks Community. How are you doing today? I hope all is well. 

In the past, we have seen users create a vendor credit so the system will allow you to apply it to the bill payments as a discount. 

First, you'll need to create a vendor credit using the inventory item. Here's how:

1. Click the Plus (+) icon.
2. Select Vendor Credit.
3. Choose the vendor name.
4. Fill in the necessary information.
5. Click Save and close.

Once done, you can now apply the vendor credit to the bill as a discount.  Please refer to the screenshot below.

Please keep in mind creating a vendor credit will automatically reduce the COGS.

I encourage seeking additional help from your accountant. They can guide which option to take based on your recording practice and business needs. If you don't have an accountant, don't sweat it. You can find one here in our Resource Center. 

If you have any other questions, feel free to comment below. We're always here to help you. Take care!

@Apples521 

"Is it incorrect to just reduce the expense account by the discount amount? Ultimately, I'd like to handle this at the point I enter the invoice as creating a credit memo is an extra step and nuisance."

That's totally acceptable.  You definitely don't need to enter a vendor credit.  How you record the discount is up to you in terms of how you want to see it on your P&L and reports.  Personally, I just discount the amount by the % discount when entering the bill.  For example, if your bill is $1234.56 and you get a 2% discount, just enter 1234.56*.98 and let QB do the math for you.  If you want to see purchase discounts as a separate line item on your P&L, then you will need to enter the discount as a separate line item on the bill or use a credit memo.