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.

How can this be done with QBDT 2021?

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@JessT wrote:

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.

---

I've got the steps you'll need on how to do this in QuickBooks Desktop, KathyP1964.

Please follow these steps:

1. Go to Lists and choose Payroll Item List.
2. Double-click the deduction item and click on Next.
3. Change the Liability account to track the deduction.
4. Click on Next until you reach Finish.

Next, create a journal entry to move funds from the liability account to the Accounts Receivable (A/R) account. Here's how:

1. Go to the Company menu and select Make General Journal Entries.
2. Fill out the fields to create your journal entry. Make sure your debits equal your credits when you’re done.
3. Select Save or Save & Close.

Lastly, you pay the invoice. Here are the steps:

1. Go to Customers and choose to 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.

The steps are sure to help you resolve your concerns.

Tag me in a comment below if you need further assistance. I'll be right here to help.

Will this work in QB desktop?

Thanks for joining this thread, gb61.

Yes, the solution shared by my peer @GlinetteC will work for desktop users. When applying a payroll deduction towards an invoice, you’ll have to set up a liability account and link it to the payroll item. Then create a journal entry and pay the invoice.

Let me share the steps again to help you accomplish the tasks mentioned above. Here’s how:

1. Go to the Lists menu and choose Chart of Accounts.
2. At the bottom of the screen, click the Account drop-down arrow and pick New.
3. Tick the radio button for Other Account Types to select Other Current Liability and press the Continue button.
4. Fill in the Account Name field with the right information and then Save & Close.
5. Next, edit the deduction item and map it to the newly added liability account.    
6. Select the Lists tab and choose Payroll Item List.
7. Look for the deduction item you wish to apply as payment to the invoice.
8. Double-click it to see more details and click Next.
9. Choose the newly added liability account in the Liability account field.
10. Tap Next until you reach the Finish button.  

Once done, create a journal entry and receive the invoice payment. Here’s an article that will guide you on how to manage your account receivables: Get started with customer transaction workflows in QuickBooks Desktop. It includes screenshots and links to easily follow the instructions.

Additionally, this resource will guide you on how to perform any payroll related-activities in QuickBooks Desktop. Since they’re arranged by topic, you’ll be able to view each one in no time: Self-help articles.

Drop me a comment below if you have other concerns or follow-up questions about applying payroll deductions towards an invoice. I'd be more than happy to assist you again.

I believe this is the problem I have been having. For over a year I have been deducting a fixed amount from the employee’s paycheck to put towards the employee’s monthly invoice for childcare at our preschool. Then I have been recording a payment toward their invoices for the amount of the deduction every payroll date. This I thought was it was done until I recently discovered this has caused entries to appear as bank deposits in my bank register in QBO. But of course, there is no actual deposit in my bank account. I believe I just skipped the whole process of creating a liability account and then doing a journal entry to move the money from the liability account to the AR account. So now I have hundreds of these I need to go back and correct, but I am still happy knowing now what the problem was! Thank you for your explanation of this. 

Oh no! This is not last easy to fix as i had thought. Any suggestions on how to correct the way I was previously recording payroll deductions and to record them correctly the way you have outlined.

Previously I had the payroll deduction being routed to "Payroll Liabilities: Employee Childcare"

I have now created a new Liability Account as you suggested "Prepaid Expenses Payable" and am routing the payroll deductions to it. But how do i go back and correct all the past entries that were made that incorrectly appear in my bank register. Any help is greatly appreciated. Thanks, Bill

'

Hey there, @Bill 2. Thanks for reaching out to the Community. Here’s what we can do to address your concern.

I suggest you create a journal entry to transfer the payroll to the right account. Allow me to show you how.

Before you do so, I recommend consulting your accountant for more information on how to record this. This way, we'll ensure the accuracy of your accounts after making these changes.

In your QuickBooks Online (QBO):

1. Go to the +New button and then select Journal Entry.
2. Fill in the needed details to create your journal entry.
3. Click Save and close once done.

You can refer to this article for more information about the basics of creating a journal entry.

Once done, run a payroll report to check if the amounts are accurate in your QBO.

You might also want to give this article a visit, it’s about Employees and payroll taxes. This is for additional reference.

If this doesn’t work on the issue, you can consider contacting our payroll support to request a correction.

Assisting you is my number one priority. Let me know how it goes by leaving a comment down below. I’ll be waiting for your response. Keep safe!

I have a similar issue:

Employee bought some or our products for which he was invoiced.  I needed to deduct this total amount from his pay at payroll.  We use a third party payroll company in Canada.  so I credited the AR account to deduct this amount from payroll (creating a credit on the customer invoices side). the invoices not paid with payroll deduction.  what should I do to pay for said invoices?  thanks a mil.  cannot seem to find a solution by myself. 

Thanks for posting here in the Community, @centralprocessin. I'm here to help you deduct the invoice amount of your employee to their paycheck in QuickBooks Online (QBO).

To start, ensure you have a liability account that can be use to map the employee deduction. You can follow the steps provided by my colleague, ShiellaGraceA above. 

Once done, map the item to the liability account. Here's how:

1. Navigate to the Gear icon and select Payroll Settings.
2. Then, click the pencil icon of the Accounting section.
3. Select the pencil icon of the deduction item you created.
4. Next, assign the liability account you created.
5. Click Continue to save your changes.

After that, create a journal entry to transfer the funds from the liability account to the Accounts Receivable (A/R) account. This will serve as a credits on the customer profile of the employee and can be used to pay their invoices. To do so, debit the liability account and credit the A/R account. To ensure the accuracy of the record, I highly recommend reaching out to your accountant for guidance.

Once done, link the credit to the invoices. Here's how:

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

Also, if you're using QBO Canada version, you can post your concern in our Community Forum for Canada. 

I'm always here ready to help if you have other concerns managing your employee paychecks. Have a good one and stay safe. 

When the A/R account is used, it creates a negative in the A/R account showing on the balance sheet.