How do I show that a purchase order has been paid but the items are not received yet? In my case, I pay upfront for items that are delivered at a later date.

You've posted your concern on the correct forum, Lauren.

Please know that we can't directly mark a purchase order (PO) as paid without linking it to an expense or bill transaction. With that, you may consider adding a Memo to indicate that you've already paid it but have yet to receive its items. You can also temporarily mark the PO as Closed until you're ready to convert it into a bill.

On top of that, you can also track items you’ve paid for but haven't received yet in QuickBooks by entering a vendor payment without affecting the inventory quantity on hand. It's possible by generating a check in QuickBooks and categorizing the payment under a prepaid inventory account. I'll go into detail so you can handle this accordingly.

To start, let's create an account exclusive for prepaid inventory-related transactions. You can utilize this account to categorize items on your purchase order (PO) that you haven't received yet.

Here's how:

1. Go to the Gear icon and select Chart of accounts.
2. Click New.
3. Choose Other Current Assets as the Account type and Inventory as the Detail type.
4. Enter the Account name. You can input "Prepaid Inventory" as its name.
5. Once done, hit Save.

After that, create a check to account for the payment and classify it to the Prepaid Inventory account.

1. Go to the + New menu and select Check.
2. Pick the vendor from the Payee dropdown.
3. From the Category details section, choose the Prepaid Inventory account from the Category column.
4. Enter the payment Amount.
5. Double-check everything, and once done, hit Save and close.

Once you receive the inventory physically, you can then link the PO to a bill. Then, re-categorize the previously created check to Accounts Payable (A/P) to produce a vendor credit that can be associated with the bill by generating a new check. For the detailed steps, please follow Steps 3 to 5 from this link: How to track your prepaid inventory.

I'm also adding this resource, which will be handy once you need a complete view of your inventory status: Use reports to see your sales and inventory status in QuickBooks Online.

If you have any follow-up questions about managing paid POs with items that have not yet been received or need help tracking your items or managing your reports, you can mention me on this thread. I'll be delighted to assist you again.

Ivan, thank you for this detailed response. As you might be able to tell, I am no expert in accounting practices! I followed everything until the "Select Check" part. I made this payment using my credit card and would like to reconcile the payment with the next CC statement. Should I add an "Expense" payment using the CC option so I can reconcile the statement? If I do not link the expense to the PO, it will not close the purchase order.

Also, most of the inventory from the PO I created this week will not be received until early 2025, and it may come in batches. Should I create a bill in 2025 for each batch of items that arrives from this large purchase order?

Honestly, it seems like QB should create an easier way to handle prepaid inventory--but, again, I'm no accountant! 

Thanks for the prompt response, Lauren. It's my pleasure to provide additional guidance with handling your prepaid inventories in QuickBooks Online (QBO). 

Yes, you can add an Expense payment transaction affecting the correct credit card (CC) account to reconcile your next statement. Here's how:

1. Click + New, and select Expense.
2. Choose the vendor from the Payee dropdown.
3. From the Category details section, choose the Prepaid Inventory account under the Category column.
4. Enter the payment amount.
5. Pick the correct Payment account and Payment method.
6. Complete the necessary details and hit Save and close once done.
   

Since you haven't physically received the inventories, you can leave the purchase (PO) open. Later, you can roll the PO to bill at the time you actually received them.

After that, you can open the previously recorded expense and re-categorize the payment to Accounts Payable to make it a credit for the vendor. Just open the Expense transaction. Then, change the account under the Category column to Accounts Payable (A/P).

Finally, mark the bill as paid by linking the credit from that expense transaction to the bill. Let me show you how:

1. Click the +New button and select Expense.
2. Pick the correct vendor. A side window will appear showing a list of bills and available vendor credits for that vendor.
   
3. Tap the Add button to the bill you want to pay. From the Expense page, you'll notice that the transaction will become a Bill Payment.
4. Scroll down to see the available vendor credits. Place a checkmark on them accordingly.
   
5. Once done, hit Save and Close to complete the process.
   
   

On top of that, I highly recommend seeking assistance from your accountant to ensure that your books are accurate and to avoid messing up your inventories. They'll be able to help and provide other expert ways of dealing with this situation.

Additionally, you'll want to check out this article for the detailed steps in case you need to review all your vendor transactions: How to view and edit vendor transactions in QuickBooks Online.

You can count on me to provide further related resources and details about handling prepaid inventories in QBO. Kindly comment with any questions, and I'll ensure a prompt response.