An employee has made a purchase and has been invoiced. Each week he gets a payroll deduction to go toward the invoice. How do i apply the deduction to the inovice?

Glad to see you here in the Community, @cameronk.

I can help you apply the payroll deduction to an invoice of your employee in QuickBooks Online (QBO).

Here's how:

1. Go to the Payroll menu and then choose Employees.
2. Choose the name of the employee you want to run.
3. Click the edit pencil icon beside Pay.
4. Select the Add a new deduction.
5. Click the Deduction/contribution drop-down arrow, then choose New deduction/contribution.
6. Select Other deductions under the Deduction/contribution type.
7. From the Type drop-down arrow, choose a deduction.
8. Enter the amount and then click OK.

I've also added this article about recording customer payments in QBO: Record invoice payments. This way, you can also record it once you receive the payment to show the paid invoice.

Don't hesitate to drop a comment below if you have other questions. I'm always happy to help. Take care!

Question - when you record the payment on the invoice what do you select? Do you set up a new Payment Method - Payroll Deduction? 

Hello there, @MadJack11.

Yes, you can set up a new payment method when recording your invoice payment in QuickBooks. This way, you can track the transactions created. I'll show you how:

1. Click the + New (Create icon).
2. Under Customers Column, select Receive Invoice payment.
3. Select Add new from the Payment method drop-down menu.
4. Click Save and new.

For detailed steps, please click this article: Record invoice payments in QuickBooks Online.

You'll also want to run the Invoices and Received Payments report. This will give you the list of all invoices and the payments that are applied to them. Just go to the Reports menu type in Invoices and Received Payments in the Search bar. 

Additionally, you can check this article on how to filter the report and run them based on your perspective: Customize reports in QuickBooks Online. It includes the steps on how to manage custom reports and memorize them.

If you have other questions or concerns, drop me a comment below or mention my name to notify me. I'll be right here whenever you need a hand. Have a nice day!

How to you record the invoice as being paid but deduction has already been done through payroll?I have several invoices that show outstanding but in fact are paid through a payroll deduction.

Thanks for coming by, @kimforbes.

I'll share the steps on how to record your employee's payments into your invoices. You'll want to create a liability account, map the employee deduction into that account. After that, create a journal entry from the liability account to the A/R account. This process lets you apply the payments to your invoices.

To create an account:

1. Go to the Accounting menu, then select Chart of Accounts.
2. Tick New.
3. In the Account window, choose Other Current Liabilities as your Account Type.
4. Enter other account information. Click Save and Close.

To create a journal entry, just go to +New, then tap Journal entry. Here's how it looks like:

Feel free to browse for specific topics here and look for responses that fit your concern, if you need help with other task in QBO.

Let me know if you still have questions or concerns with payroll or invoices. I'm more than happy to help. Take care and stay safe.

This did not seem to work. The Invoice is still showing outstanding

Hi Kim!

Thank you for getting back to us. I'll also explain further what Shiella provided above, so you can easily follow the steps. But first, I assume that you've already created a liability account.

First, you'll want to map the deduction item to a liability account. You can skip this section if you already did it.

1. Click the Gear icon and choose Payroll Settings.
2. Choose the pencil icon of the Accounting section.
3. Click the pencil icon of the deduction item you created.
4. Assign the liability account you created.
5. Click Continue to save your changes.

Second, create a journal entry to move funds from the liability account to the Accounts Receivable (A/R) account. This will become credits on the customer profile of the employee and can be used to pay their invoices. By the way, I assume the employee already has a customer profile because you invoiced them.

1. Click +New and choose Journal Entry.
2. On the first line, select the liability account and enter the amount in the DEBIT field.
3. On the second line, select the A/R account, enter the amount in the CREDIT field, and tag the customer's name in the NAME field.
4. Click Save and close.
   

Third, pay the invoices using the credits.

1. Click on +New and choose Receive payment.
2. Choose the customer's name in the payee field.
3. In the Outstanding Transactions section, select the invoices to be paid.
4. In the Credits section, select the Journal Entry to be applied as payment.
5. Click Save and close.
   

That will do it. After paying the invoice, you can check the customer's balance in their profile and check the balance of the liability account in the Chart of Accounts.

I'm just around if you have other questions about paying the invoices of your employees.