How do you handle vendor bills paid for by a customer?

I'm glad to have you here, @mistyglsolar. To assign the vendor bills to a customer's dues, link an open or a new bill to your client's invoice, and make it billable. This way, the payment obligation will be on their end.

Start it by creating a bill transaction to your vendor that you will be linking to a customer. Here's how:

1. Hover your cursor over the + Create.
2. Below the Vendors tab, select Bill.
3. Click the Vendor field and select one.
4. Go to the Item details section and select the products or services that were being purchased. Enter the counts in the QTY section, and the rate to automatically show the amount.
5. After that, make it Billable. Then, select a client you want this transaction to be linked to from the Customer/Project column.
6. Review the details you entered. Once done checking if everything is accurate, tap Save and close below. 
   

To finish this, create an invoice and add this as a billable expense. Feel free to follow these steps:

1. Go back to the + Create tab and select Invoice from the Customers column.
2. In the Add customer field, pick the client you added when you created the bill.
3. Suggested transactions will show on the right side. Pick the Billable expense you made and click Add.
4. Once done, you can choose to Save it for later or Review and send. Then, follow the on-screen steps.

Once the customer has paid, receive the payment from the invoices tab, and pay the bill you create to balance the transaction.

Please keep us updated on the result of linking the bill to your customer, so we can assist you further and guide you in achieving your goal. 

@Bryan_M - Yikes.  Did you read and understand your customer's question?  The customer paid a vendor bill.  Your suggestion of entering a bill and marking it as billable makes no sense, since the customer has already paid the bill.  The OP owes the customer; the customer doesn't owe the OP.

@mistyglsolar 

Create a journal entry for the amount of the vendor bill: debit A/P for the vendor and credit A/R for the customer that paid the bill.  Then, go to Pay bills and apply the credit created by the journal entry to the vendor bill.  At this point, the customer has an A/R credit equal to the vendor bill they paid.  You can either: 1) apply the credit to one of their invoices, or 2) issue a check to the customer.  If you issue a check, assign A/R to the check.  To tie the check to the journal entry, go to Receive payment and apply the credit created by the journal entry to the "invoice" created by the check.   

We tried that but no suggested transaction appear on our invoice when receiving the invoice payment so still trying to figure this out

Thank you the journal entry method worked