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Level 1

Contractors - Payee vs Vendor

I am new to QBO - I have just downloaded all my transactions from year. I have aprx 75 contractors that perform services for a business that I work with each month. These are referees working for a sports league. I oversee the assignments and payments with my business. 

 

I am trying to set up all the payments to these referees/contractors in QB online. Do I set them up as a Vendor or a Customer in the Payee Field? My category was going to be Contractors. 

Solved
Best answer 12-19-2018

Best Answers
Level 3

Contractors - Payee vs Vendor

If they are working for you and you are paying them then they would be vendors.  Customers are for people who you do work for and who pay you.

View solution in original post

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QuickBooks Team

Contractors - Payee vs Vendor

Thanks for choosing QuickBooks, SnoKingRef.

 

I agree with aj4fluentbiz. A Vendors are those people or companies that you pay money to, such as a store, utility, landlord, or subcontractors who do work for you. On the other hand, Customers are people who owe you money for products purchased or service rendered.

 

I'd be happy to walk you through on how to add Customer/Vendors by following the steps below:

 

To add Customers:

  1. Click on the Sales on the left menu bar.
  2. Choose Customers.
  3. Click New Customer.
  4. Enter the necessary information.
  5. Click Save.

To add Vendors:

  1. Click on the Workers on the left menu bar.
  2. Click Contractors.
  3. Click Add a contractor.
  4. Enter the necessary information.
  5. Click the Add a contractor tab.

I've attached some screenshots below so you can have a better view.

 a.PNG b.PNG

 

Should you have additional questions about vendors and customers or anything else QuickBooks, don't hesitate to ask me here in the Community. I'll be around to help you out

View solution in original post

17 Comments
Level 3

Contractors - Payee vs Vendor

If they are working for you and you are paying them then they would be vendors.  Customers are for people who you do work for and who pay you.

View solution in original post

Highlighted
QuickBooks Team

Contractors - Payee vs Vendor

Thanks for choosing QuickBooks, SnoKingRef.

 

I agree with aj4fluentbiz. A Vendors are those people or companies that you pay money to, such as a store, utility, landlord, or subcontractors who do work for you. On the other hand, Customers are people who owe you money for products purchased or service rendered.

 

I'd be happy to walk you through on how to add Customer/Vendors by following the steps below:

 

To add Customers:

  1. Click on the Sales on the left menu bar.
  2. Choose Customers.
  3. Click New Customer.
  4. Enter the necessary information.
  5. Click Save.

To add Vendors:

  1. Click on the Workers on the left menu bar.
  2. Click Contractors.
  3. Click Add a contractor.
  4. Enter the necessary information.
  5. Click the Add a contractor tab.

I've attached some screenshots below so you can have a better view.

 a.PNG b.PNG

 

Should you have additional questions about vendors and customers or anything else QuickBooks, don't hesitate to ask me here in the Community. I'll be around to help you out

View solution in original post

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Level 1

Contractors - Payee vs Vendor

Very helpful thank you - 

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Level 1

Contractors - Payee vs Vendor

Are contractors entered under sub contracting ( cost of goods sold)

 

We hire out work to independent contractors to complete- they submit a bill for their time.

The goods are service related and not physical goods.

 

Is this the correct category for this transaction?

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Moderator

Contractors - Payee vs Vendor

Hi there, @GTM Dawn.

 

Thank you for joining the Community. I'd be happy to help share some information about setting up a subcontractor in QuickBooks Online. 

 

Generally, you pay a contractor using an expense account. This way, QuickBooks tracks these payments and adds it to the contractor’s when you create the 1099 form.

 

Expenses for products and services need to be clearly differentiated from the work they do as a subcontractor. You can create multiple expense accounts to map those transactions easily.

 

Here's how to set up a new Expense Account to track subcontractor expenses: 

  1. On the left pane, select the Accounting tab.
  2. Select Chart of Accounts.
  3. In the upper right corner, click New.
  4. Select Expenses as the Account Type and choose a Detail Type.
  5. Enter a unique account name to remember them easily. 
  6. Click Save and close

 Moving forward, every time you enter an expense or a check to them, you can select the account you want based on the service they provide. 

 

I've attached some articles below for additional details, as well as screenshots for additional reference: 

That should point you in the right direction. Please know that I'm just a post away if you have any other questions about setting up contractors or while working with QuickBooks. I'll be happy to help you further. Have a great day ahead.  

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Level 1

Contractors - Payee vs Vendor

I new at this company and we use qbonline. There is a question. We have our clients who pay direct to insurance companies who in turn then send us a check for a certain dollar amount depending on how ever many clients paid that month. The person before me had these insurance companies set up as vendors but I believe if they are sending us a check they would be a customer , we supply them services of clients. Is this correct. I want the bookkeeping to be correct. If so where do I go change it.

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QuickBooks Team

Contractors - Payee vs Vendor

You're correct, SStone4203.

 

We'll have to set them up as customers since they're sending you checks. For now, we need to make sure that the affected accounts are correct which is an Income account. That way, we don't need to modify all the transactions since it'll post to the appropriate accounts.

 

We can apply the changes moving forward to avoid this from happening again. Once you've set them up as customers, we can make their vendor profiles inactive to avoid confusion. Go to the Expenses tab and select Vendors. Check the box beside the vendor names. Under the Batch actions drop-down, select Make inactive.

 

Hope this helps. Let me know if you need more help.

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Level 1

Contractors - Payee vs Vendor

The checks we get are for commissions. Would they still be customers?

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Level 1

Contractors - Payee vs Vendor

The checks we get are for commissions. Would they still be customers? 

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Level 1

Contractors - Payee vs Vendor

The checks we get are for commissions. Would they still be customers? We are a yacht / boat brokerage company . They send us commission checks and once in a while we may send them a check but not often. How would I categorize them. Are they a customer, vendor, sales??

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Level 1

Contractors - Payee vs Vendor

ALEXV The checks we get are for commissions. Would they still be customers? We are a yacht / boat brokerage company . They send us commission checks and once in a while we may send them a check but not often. How would I categorize them. Are they a customer, vendor, sales??

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Anonymous
Not applicable

Contractors - Payee vs Vendor

Good day, @SStone4203,

 

Commissions can either be revenue or an expense. If those checks are given to you for obtaining sales, it is an income on your books.

 

To account for this entry, create a service item called Commission Earned and select an income account for it. Use a generic client, or create the issuing company as a customer. Here's how:

  1. Go to the Sales menu, then Products and Services.
  2. Click on the New button and select Service.
  3. Enter the name and all other information on the item set up.
  4. Select a Commission Income Account.
  5. When done, hit Save and close.

Use it on a sales receipt once you get the commission. Follow the steps below:

  1. Tap on the Create (+) icon at the top-right section of the Dashboard.
  2. Pick Sales Receipt from the list and manually fill out all necessary data.
  3. Save the transaction once completed.

 

If you have any follow-up questions or need further help, please let me know in the comment section below. I'll be glad to help. Have a nice day!

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Level 1

Contractors - Payee vs Vendor

i work for a real estate firm and i pay my realtors commissions only (non payroll).  they are independent contractors.  i currently have them set up as "vendors"  and write a check and then print.  i'd like to set them up with direct deposit.  i've got about 100 of them. i need the direct deposit to be timely, ie two days or less.

what is the difference between setting them up as a "vendor" vs "contractor" in  QBO?

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QuickBooks Team

Contractors - Payee vs Vendor

Hello, @HeidiMarcotte.

 

A vendor is a person or a business that sells a service or a product. While contractors are people assigned to a specific task that provides services to clients. You can pay both vendors and contractors using direct deposit. 

 

Here's how to set up direct deposit for your contractors:

  1. Go to the Workers menu.
  2. Choose the Contractors tab.
  3. Select the contractor's profile.
  4. Click Change bank account under the Payment details section.
  5. Add or update the bank information.
  6. Click Save.

You can browse this article for more detailed steps: Contractor direct deposit.

 

Also, you can read through these articles to learn more about the direct deposit processing timelines and schedules:

We got your back if you have other questions about managing your vendors and contractors. Have a great day!

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Level 1

Contractors - Payee vs Vendor

Thank you so much.  So why cant i just choose "write check" and instead of choosing print check you choose pay by direct deposit?  

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Level 1

Contractors - Payee vs Vendor

I'd like to send out an email to all 100 of my realtors (independent contractors) asking them to add their bank routing and account numbers so i can pay them direct deposit.  I already have all of their W-9's in a print format and recorded in QB's under vendors.   Is there a way to gather this bank info electronically?

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Moderator

Contractors - Payee vs Vendor

Hi again, @HeidiMarcotte. Let me clarify things out. 

 

In QuickBooks Online, the requirement to pay your contractors for Direct Deposit is to have an active payroll. 

 

To learn more about this, here's a great resource that you can read: Contractor direct deposit.

 

However, if you're under a non-payroll subscription, you can continue to write a check, expense and create a bill for your contractors. 

 

If you have any other questions, let me know by commenting below. I'm here for you. Have a great day!

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