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VBurgs
Level 2

Invoice reductions

I sell products to a distributor.  The distributor offers services to me such as featuring my products in their catalog. I pay the distributor for these services through a reduction on the invoice for the products I sell them.

 

Ex: 

- I invoice them for $1,000 worth of product. 

- They feature my products in their catalog for $100.

- They pay me $900 instead of the $1,000.

 

How do I record this?  First thought was Credit Memo but I don't think that will work.

 

 

Solved
Best answer March 29, 2020

Best Answers
vpcontroller
Level 11

Invoice reductions


@VBurgs wrote:

I sell products to a distributor.  The distributor offers services to me such as featuring my products in their catalog. I pay the distributor for these services through a reduction on the invoice for the products I sell them.

 

Ex: 

- I invoice them for $1,000 worth of product. 

- They feature my products in their catalog for $100.

- They pay me $900 instead of the $1,000.

 

How do I record this?  First thought was Credit Memo but I don't think that will work.

 

 


@VBurgs 

 

- They feature my products in their catalog for $100.

 

Create a new product/service code for this promotional item.

This should be your expense item like Advertising/Promotional type. When you create a new product/service item, for the Income Account field (see the screenshot below for reference), select this Expense Account.

 

Example: 

Your Invoice will something like this

- I invoice them for $1,000 worth of product = $1,000

- They feature my products in their catalog for $100 = ($100) ===> enter negative amount

- They pay me $900 instead of $1,000 = $900

 

So, you're creating a Client Invoice that includes both Revenue and Credit for Client's service on the same Invoice.

 

Hope this helps!

 

advertising-promotional.PNG

View solution in original post

vpcontroller
Level 11

Invoice reductions

@VBurgs 

 

You're welcome. I am glad I was able to help!

View solution in original post

8 Comments
vpcontroller
Level 11

Invoice reductions


@VBurgs wrote:

I sell products to a distributor.  The distributor offers services to me such as featuring my products in their catalog. I pay the distributor for these services through a reduction on the invoice for the products I sell them.

 

Ex: 

- I invoice them for $1,000 worth of product. 

- They feature my products in their catalog for $100.

- They pay me $900 instead of the $1,000.

 

How do I record this?  First thought was Credit Memo but I don't think that will work.

 

 


@VBurgs 

 

- They feature my products in their catalog for $100.

 

Create a new product/service code for this promotional item.

This should be your expense item like Advertising/Promotional type. When you create a new product/service item, for the Income Account field (see the screenshot below for reference), select this Expense Account.

 

Example: 

Your Invoice will something like this

- I invoice them for $1,000 worth of product = $1,000

- They feature my products in their catalog for $100 = ($100) ===> enter negative amount

- They pay me $900 instead of $1,000 = $900

 

So, you're creating a Client Invoice that includes both Revenue and Credit for Client's service on the same Invoice.

 

Hope this helps!

 

advertising-promotional.PNG

View solution in original post

VBurgs
Level 2

Invoice reductions

This looks great and easy.

 

I have been looking into setting up a "Barter Account" to act as a clearing account.  I was hoping to avoid this approach as it seems a little messy.


vpcontroller
Level 11

Invoice reductions

@VBurgs 

 

You're welcome. I am glad I was able to help!

View solution in original post

VBurgs
Level 2

Invoice reductions

@vpcontroller... one more question.

 

What reasons would there be to go the more complicated route of setting up a "Barter Account" / "Barter Transaction"? 

 

Thanks again!

vpcontroller
Level 11

Invoice reductions


@VBurgs wrote:

@vpcontroller... one more question.

 

What reasons would there be to go the more complicated route of setting up a "Barter Account" / "Barter Transaction"? 

 

Thanks again!

 


@VBurgs 

 

Great question!

There may be a situation like this is also your Vendor as well as your Client and you do volume transactions and you owe them money, the better option is to use Barter transaction method.

 

Hope this helps!

 

VBurgs
Level 2

Invoice reductions

Hi @vpcontroller .  Hope you are doing well.  I had another question / issue with this approach of creating a

new product/service for a promotional item as an Advertising/Promotional Expense. 

 

It has been working just fine, however, I have an invoice where I gave a customer 6% off the entire order.  I am now going in and adding a new Line Item for the Promotional Item Expense but it too is being included in the 6% discount. 

 

It doesn't look like the feature for Line-Item Discounts is available for QBO yet.  That would certainly fix this.

SarahannC
Moderator

Invoice reductions

Hi there, VBurgs.

 

Let me share some information on why adding a new line item for Promotional Item Expense includes in the 6% you've given to your customer.

 

In QuickBooks Online, adding the discount feature will calculate the entire items we've added to the invoice.  Though, we can get the subtotal for the multiple items. For example, we have ten items added on the invoice. We can get the subtotal for the first item up to the 5th item. It'll show the total amount without the percentage calculated by QBO.

 

However, when adding multiple line items, the system will still include the new ones in the 6% discount. It's because the discount feature works to calculate the entire line items of the invoice. Also, adding a discount per line item is unavailable.

 

Let's take a look at this sample screenshot:

invoice.PNG

 

 If you don't want the other items included in the 6%, I would suggest creating a new invoice for them. That way, they'll not be include to the 6%. Let's just make sure to enter the same customer information. 

 

Let me know if you have other questions. I'll be around to help. Take care!

VBurgs
Level 2

Invoice reductions

Thank you for your reply @SarahannC .  Here is some more detail from the original post and what I am doing:

 

"I sell products to a distributor.  The distributor offers services to me such as featuring my products in their catalog. I pay the distributor for these services through a reduction on the invoice for the products I sell them.

 

Ex: 

- I invoice them for $1,000 worth of product. 

- They feature my products in their catalog for $100.

- They pay me $900 instead of the $1,000."

 

It was suggested that I create a new product that connects the "Income Account" the a "Promotional Expense" with a negative Sales amount.  In other words, create a new Product called "Promotional Ad" with a price of -$100.00.  It doesn't seem like I can create a separate invoice that is negative.  It also looks like "Line-Item" Discounts feature is not currently available in the US.  Only India.

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