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Community Contributor **

Inventory - POs with Multiple prepays - how to track for AP and cash flow?

I know how to create POs and receive items/enter bill, pay bill. 

 

I don't know how to create POs and book the bills so that I can see when payments are due in my pay bills window to more accurately understand cash flow. 

 

For example:

PO123 for 100 widgets for $10,000.

Vendor requires 50% upfront, 25% in 4 weeks and 25% in 8 weeks. 

 

I want to be able to book the bill in 3 parts:

  • PO123-Deposit $5,000 due 1/31/2019
  • PO123-Pay2 $2,500 due 3/1/2019
  • PO123-Pay3 $2,500 due 4/30/2019

Booking the bill in 3 parts means my payables are accurate by amount and date due. 

 

I want to be able to create POs and receive items against my PO.

 

I thought about booking the 3-part bills to a WORK IN PROCESS inventory account.  When the goods are received and a bill is created for them, I could do a journal entry to debit accounts payable and credit work in process.  This would give me a credit to pay the bill created by receiving items against the PO, and it would also serve to relieve the WORK IN PROCESS account now that I actually have my inventory on hand. 

 

Thoughts?  Is this a terrible idea? 

 

Thanks!

 

 

 

 

Solved
Best answer 05-17-2019

Accepted Solutions
Established Community Backer ***

Re: Inventory - POs with Multiple prepays - how to track for AP and cash flow?


@zoelda wrote:

This is a really interesting way to do it, and -- appreciate the comment about journal entries. We tend to use Journal Entries a good bit (and I will keep your comment in mind when doing so)!

 

To make sure I understand: 

  • PO created
  • Bills created and booked to Prepaid Inventory
  • Bills adjusted if/when necessary based on any changes in the PO
  • Bills paid on schedule (2 out of 3 are paid before goods arrive, 3 is paid after goods received)
  • PO received and invoiced
  • Items/cost/quantity self populate in the "Items" tab on the Bill -- let's say I bought $30k worth of widgets.
  • Invoice says $30,000
  • I go to the "Expenses" tab and book ($30,000) to prepaid inventory.  
  • This effectively zeros out the invoice I've created, but maintains my bills/payment schedule. 

Thanks!!

 

Hell you explained it better than I did

:-)


5 Comments
QuickBooks Team

Re: Inventory - POs with Multiple prepays - how to track for AP and cash flow?

I'd be glad to help you create a purchase order and book the bill in three parts, zoelda

 

I know some steps to book your bill in three parts and pay them in an accurate amount and due dates. Once you're done creating the purchase orders, you can receive the items and enter bill.

 

Here are the steps:

  1. Go to Vendors and choose Receive Items and Enter Bills.
  2. Enter the bill and click Save & Close.

Once the bill is created, kindly open the it and click the Pay bill button. Then, enter the upfront amount which is 5,000.00. 

 

Open the bill again and change the due date to the date which you'll pay in four weeks. Then, click Save & Close. Once done, click the Pay Bill button and enter the 2,500 amount that you'll pay in 4 weeks.

 

Just follow the same process for the other 2,500 that you'll pay in 8 weeks.

 

I've also provided the screenshots below:

 

 

 

 

Picture9.png

 

Picture9.png

 

Keep posting here in the Community if you have further questions. Have a good one!

Established Community Backer ***

Re: Inventory - POs with Multiple prepays - how to track for AP and cash flow?


@zoelda wrote:

I know how to create POs and receive items/enter bill, pay bill. 

 

I thought about booking the 3-part bills to a WORK IN PROCESS inventory account.  When the goods are received and a bill is created for them, I could do a journal entry to debit accounts payable and credit work in process.  This would give me a credit to pay the bill created by receiving items against the PO, and it would also serve to relieve the WORK IN PROCESS account now that I actually have my inventory on hand. 

 

Thoughts?  Is this a terrible idea? 

 

Thanks!


I would call the asset account (not an inventory type account) pre-paid inventory, and use that account on the bill in the account details part. Using that you can create the three bills with due dates.

 

When the widgets finally come in, bring up the PO, covert to a bill,
1. list the widgets in the item details part with qty and total cost
2. list the pre-paid account in the account details part and enter the total amount as a negative number

save, and pay the balance due if any.

 

Journal entries should be the exception when using QB, they often do not work as you think they should, and when you use inventory type items they never work for inventory. It is much better to use the forms on the home page the way QB is designed to be used. Journal entries also bypass accrual/cash reporting, and will not show on many reports.

Community Contributor **

Re: Inventory - POs with Multiple prepays - how to track for AP and cash flow?

This is a really interesting way to do it, and -- appreciate the comment about journal entries. We tend to use Journal Entries a good bit (and I will keep your comment in mind when doing so)!

 

To make sure I understand: 

  • PO created
  • Bills created and booked to Prepaid Inventory
  • Bills adjusted if/when necessary based on any changes in the PO
  • Bills paid on schedule (2 out of 3 are paid before goods arrive, 3 is paid after goods received)
  • PO received and invoiced
  • Items/cost/quantity self populate in the "Items" tab on the Bill -- let's say I bought $30k worth of widgets.
  • Invoice says $30,000
  • I go to the "Expenses" tab and book ($30,000) to prepaid inventory.  
  • This effectively zeros out the invoice I've created, but maintains my bills/payment schedule. 

Thanks!!

 

 

Moderator

Re: Inventory - POs with Multiple prepays - how to track for AP and cash flow?

I appreciate you doing business with Intuit, @zoelda.

 

Yes, you can enter the transactions the way you detailed them on the bullets. For additional references, check the links added below.

I also recommend reaching out to your accountant to ensure the best course of action for your organization and to avoid problem with the books in the future.

 

If you have follow-up questions about recording transactions in QBDT, just leave a comment. I'm always here to offer further assistance. Take care always and have a wonderful weekend! 

Established Community Backer ***

Re: Inventory - POs with Multiple prepays - how to track for AP and cash flow?


@zoelda wrote:

This is a really interesting way to do it, and -- appreciate the comment about journal entries. We tend to use Journal Entries a good bit (and I will keep your comment in mind when doing so)!

 

To make sure I understand: 

  • PO created
  • Bills created and booked to Prepaid Inventory
  • Bills adjusted if/when necessary based on any changes in the PO
  • Bills paid on schedule (2 out of 3 are paid before goods arrive, 3 is paid after goods received)
  • PO received and invoiced
  • Items/cost/quantity self populate in the "Items" tab on the Bill -- let's say I bought $30k worth of widgets.
  • Invoice says $30,000
  • I go to the "Expenses" tab and book ($30,000) to prepaid inventory.  
  • This effectively zeros out the invoice I've created, but maintains my bills/payment schedule. 

Thanks!!

 

Hell you explained it better than I did

:-)