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arundas
Level 1

Difference and relation between Purchase Order, Bill and Supplier Credit

Using QBO and trying to understand the difference and relation between Purchase Orders, Bill and Supplier Credit. All of them allow you to enter inventory items, so how are they different from each other? When do we need to use each?

Specifically, we don't actually send Purchase Orders from Quickbooks, but rather negotiate with suppliers through other channels, and then get an invoice from them, which we then proceed to pay according to the terms of payment. Then the supplier ships the item (which may take a few weeks).

If that is the case, can I just skip Purchase Order and straghtaway create a bill, and then record bill payments against this bill? Because creating Purchase Order doesn't seem to serve any purpose other than sending it to supplier (which we don't), and you need to create a bill from it anyway. So then what's the point?

And I'm afraid, if I create a PO and then a bill, it will increase the inventory TWICE (100 from PO, then 100 from Bill = 200, but actual quantity is only 100). Am I right?

And what is Supplier Credit? What circumstances do we use this functionality? And what happens once we have entered Supplier Credit? How do we use up this credit?

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Best answer October 15, 2018

Best Answers
Anonymous
Not applicable

Difference and relation between Purchase Order, Bill and Supplier Credit

A purchase order is a non-posting document that merely serves as a memo in which you tell the supplier what it is that you wish to purchase.  It is purely optional and unnecessary.

A bill is entered into QB to record the goods or service that you received from the supplier and which you are obligated to pay.

A supplier credit is the opposite of a bill.  It is a document which the supplier gives you to indicate that he owes you that amount of money.  You might receive a supplier credit if you returned something that you previously received a bill for.

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7 Comments 7
Anonymous
Not applicable

Difference and relation between Purchase Order, Bill and Supplier Credit

A purchase order is a non-posting document that merely serves as a memo in which you tell the supplier what it is that you wish to purchase.  It is purely optional and unnecessary.

A bill is entered into QB to record the goods or service that you received from the supplier and which you are obligated to pay.

A supplier credit is the opposite of a bill.  It is a document which the supplier gives you to indicate that he owes you that amount of money.  You might receive a supplier credit if you returned something that you previously received a bill for.

arundas
Level 1

Difference and relation between Purchase Order, Bill and Supplier Credit

If I create a bill for items not received yet but I'm making payment in advance, is that OK?
Anonymous
Not applicable

Difference and relation between Purchase Order, Bill and Supplier Credit

If you expect to receive the items shortly thereafter, say within a few days, you'll be fine.  If you are prepaying for goods that you will not receive for months, there are better ways to handle it.
arundas
Level 1

Difference and relation between Purchase Order, Bill and Supplier Credit

What is the better way to handle it? It would typically be a month or two.
Anonymous
Not applicable

Difference and relation between Purchase Order, Bill and Supplier Credit

Let me preface my reply by saying that I am not an accountant and I'm sure that there are others that will have a different method.

I do not enter the bill into QB.  I simply write a check to the vendor and use Payables as the account.  When the goods arrive, I enter the bill and apply the credit (prepayment) towards the bill.

Accountants will probably tell you that you should create an account called Prepaid Inventory and assign the prepayment to that account.  Consult your accountant for the best advice.
Rustler
Level 15

Difference and relation between Purchase Order, Bill and Supplier Credit

:+1:
I do it that way all the time
Rustler
Level 15

Difference and relation between Purchase Order, Bill and Supplier Credit

@ arundas

If I create a bill for items not received yet but I'm making payment in advance, is that OK?

no, a bill stocks the items or books the expense


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