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Level 2

How to fix unapplied cash bill payment expense?

I noticed items missing from my Expense report by vendor.  I've traced these to several situations with unapplied cash bill payment expenses.  I see why they happened, because the bill payment check was dated earlier than the bill.  

It seems like all the recommended fixes appear to say to go back and "check the box" to show the payment is applied to the bill.  However, in each of my cases the box is already checked for the appropriate bill...and each bill says there is an associated payment.

I believe I literally  put each bill into QB before entering the check, but unfortunately dated them incorrectly.

Could I just go change the dates of each bill to prior to the check date - would that fix it?  would that be a proper correction?

(note: these are all in periods which have been reconciled).

thanks - David
Solved
Best answer February 02, 2020

Best Answers
Highlighted
QuickBooks Team

How to fix unapplied cash bill payment expense?

Thanks for coming to the Community, @dsoniat. I appreciate you for sharing detailed information on your concern. 

 

Yes, that's the proper correction as Unapplied Cash Payment shows when you enter a bill payment before entering the bills. You can change the dates of each bill and ensure that they're dated before the bill payments even they are all reconciled. 

 

However, it would be best to consult your accountant before doing it especially when you're using accounting method (Cash or Accrual basis) for your business to make sure your books are accurate. 

 

For your reference, read through these help articles to learn more: 

 

 

Let me know if you'll need help with anything else. I'm always around to guide you some more. 

View solution in original post

10 Comments
Highlighted
QuickBooks Team

How to fix unapplied cash bill payment expense?

Thanks for coming to the Community, @dsoniat. I appreciate you for sharing detailed information on your concern. 

 

Yes, that's the proper correction as Unapplied Cash Payment shows when you enter a bill payment before entering the bills. You can change the dates of each bill and ensure that they're dated before the bill payments even they are all reconciled. 

 

However, it would be best to consult your accountant before doing it especially when you're using accounting method (Cash or Accrual basis) for your business to make sure your books are accurate. 

 

For your reference, read through these help articles to learn more: 

 

 

Let me know if you'll need help with anything else. I'm always around to guide you some more. 

View solution in original post

Highlighted
Level 2

How to fix unapplied cash bill payment expense?

Thanks @katherinejoyceO   Changing the dates of the bills fixed the issue and the expenses now appear on the report.

 

David

Highlighted
Level 1

How to fix unapplied cash bill payment expense?

This also fixes my issues, but honestly I don't understand the reasoning for the functionality being this way. So we are penalized for paying the bill off early and made to do extra work? That seems dumb. 

 

Can someone explain to me why this works this way? 

Highlighted
Level 2

How to fix unapplied cash bill payment expense?

I have a client who, like myself, prefers to overpay by double or triple on invoices for regular expenses to create credit balances and reduce the likelihood of incurring late fees.  How should those be addressed going forward?  Do I need to create expenses to A/R and date the bill payments that match them for the invoice date?  Will I always see these balances if we continue to manage our bill payments this way?  The aging below is accurate, but the P&L detail report doesn't reflect this.image.png

Highlighted
QuickBooks Team

How to fix unapplied cash bill payment expense?

I can share a couple of options on how to handle bill prepayments in QuickBooks Online, @cheeks622.

 

You can create either a check or an expense to the vendor and record it to your Accounts Payable (A/P) account. This way, the balance will decrease until you're ready to enter the final bill. Before doing so, I recommend consulting an accountant to know which option is best for you.

 

To create a check or an expense, here's how:

 

  1. Click the +New button, and then select either Check or Expense under the Vendors section.

  2. Choose the Payee, and then go to the Category details drop-down.
  3. Select Accounts Payable (A/P) on the Category column.
  4. Fill out other needed info, and then hit Save and Close to confirm the action.

Once done, enter a bill. Let me guide you how:

 

  1. Tap the +New button again, and then choose Bill.
  2. Enter the Vendor name in the drop-down, and then choose A/P account again in the Category column.
  3. Fill out other necessary details, and then click Save and Close.

Then, you may now apply the prepayments to a bill. Here are the steps how:

 

  1. Go to the Expense menu, and then choose the Vendors tab.
  2. Locate the vendor name, and then open the bill associated with it.

  3. Click the Mark as paid button, and then make sure the bill in the Outstanding Transactions and the expense under the Credits section are checked.
  4. Hit Save and Close.

To track all the bill prepayments you've made, you can pull up the Vendor Balance Detail report. Let me show you how:

 

  1. Go to the Reports menu at the left pane.
  2. Choose Vendor Balance Detail under the What you owe section.

Also, you can personalize it to show the info you need. For more info, please review this article: Customize reports.

 

Please let me know if you need more help regarding this or have other QuickBooks concerns. I'll be here to lend a hand. Have a good one.

Highlighted
Level 2

How to fix unapplied cash bill payment expense?

Thank you for your help. My question was more about how I'm affecting the P&L than how to create the records, though. Am I to infer from your answer that the proper method to record prepayments without creating an Unapplied Cash Bill Payment Expense balance is indeed to record the A/P expense to match the bank statement and apply bill payments dated the date of the bills as they come in?

Highlighted
QuickBooks Team

How to fix unapplied cash bill payment expense?

Let me explain how the process works, Cheeks622.

 

There are two accounting methods (Cash and Accrual) in QuickBooks Online. The Profit and Loss report will provide a different picture depending on the method you pick.

 

You can follow the recommendation of my colleague. Although, when you record the A/P transaction, it will still affect the Profit and Loss report in the Cash accounting method only. 

 

Let me share some articles that can help you:

If you have additional questions, please feel free to leave a comment below. We'll reply as soon as we can. 

Highlighted
Level 2

How to fix unapplied cash bill payment expense?


@Kristine Mae wrote:

Let me explain how the process works, Cheeks622.

 

There are two accounting methods (Cash and Accrual) in QuickBooks Online. The Profit and Loss report will provide a different picture depending on the method you pick.

 

You can follow the recommendation of my colleague. Although, when you record the A/P transaction, it will still affect the Profit and Loss report in the Cash accounting method only. 

 

Let me share some articles that can help you:

If you have additional questions, please feel free to leave a comment below. We'll reply as soon as we can. 


I believe the report I attached shows I'm reporting on a cash basis (at least, that's the setting I chose in the Account Settings menu when I set her up), so I'm pretty sure I'm seeing the report I intend to see. 

 

Was your colleague's recommendation that I can avoid generating these Unapplied Payment balances by creating checks/expenses booked to A/P and dating the bill payments for the date of the invoice?  Not to be obtuse, but I haven't gotten an explicit answer as to whether this methodology is right or wrong, just instructions on reporting and entering expenses, bills, and payments.  Should I just play around with the record types and dates and see what the effects are?  I'm billing this client by the hour, so I don't want her to have to pay for my trial and error as I figure out how to give her accountant useful books.

 

 

Highlighted
QuickBooks Team

How to fix unapplied cash bill payment expense?

Thanks for getting back to us, @cheeks622.

 

I have some information about the unapplied cash bill payments. The steps shared by my colleague @RayJohn_D are ways on how to record a bill payment when it's not applied to a bill yet. It is an account that QuickBooks automatically created for cash-basis reporting. This account will show up in your Profit and Loss report when:

 

  • a bill payment for a vendor is recorded before entering the bills
  • if you entered bill payments without matching them to bills

What to do if you see this account on your profit and loss? You'll have to go to the Pay bills page to match the bill payment. If you don't see the matching bill for this payment, create it. Check out this link for more information. 

 

Feel free to leave a message for me if you have other questions or concerns. I'm more than happy to assist you every step of the way. Take care and have a wonderful day ahead.

 

 

 

 

 

 

Highlighted
Level 2

How to fix unapplied cash bill payment expense?

So I played around with entry methods and discovered that in recording only with Bill Payments, the portion on the bill payment allocated to the prepaid expense shows up as unapplied on the P&L, and when using Expenses booked to A/P, the entire transaction shows as unapplied. The paid invoices for the reporting period still show in the appropriate account, so I can deduce that the Unapplied Cash Bill Payment Expenses account shows the presumed amount of prepaid expenses based on the transaction date and the applied payments succeeding that date on the transaction itself.

It would explain why the entire Expense amount would show (no applied payments on a reduction to accounts payable) and only shows the prepaid amount on Bill Payments, even when Bills from future dates are checked off (Bill Payment has applied Bills with dates preceding and succeeding the Bill Payment date). For my purposes, I can see that the recording of Expenses and matching them to Bills as Bill Payments suggests that the entire amount paid was not previously due, and if I do want to accurately demonstrate the amount of genuinely prepaid expenses on my P&L I need to record Bill Payments. I can give my client context for this and tell her that it's not a line item that works in tandem with the expenses she knows they eventually paid unless she has an outstanding credit balance at the end of the reporting period.

Not for nothing, I should mention that for clients using Classes to separate income and expenses, going the Bill Payment route doesn't always accurately allocate the Classes, so some research will be needed to massage a P&L before presenting. A possibly cleaner solution is to record the Bill Payment and apply the Bills up to the payment date and record an Expense for the unbilled portion of the transaction to A/P and classify that line item. It's a little more work upfront for an easy (or easier) to read P&L later.

 

Hope this helped the next person.  Have a great weekend everyone!

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