Adjust payment to Vendor Bills with Accounts Receivable

pennvestor · ‎May 30, 2020

Hi,

I have setup my Property management company as a Vendor and created bills for the monthly PM and landscaping fee I pay them.

This PM owes me some money from before that I would like to adjust against the payments towards PM fee.

I was thinking to create an Accounts Receivable for PM company and setup starting balance equal to what they owe me. At the time of Paying Bill, I was hoping to adjust against this Accounts receivable to balance it out instead of paying bills from the bank account. It seem this is not possible as the only option I see to make payment out from is the bank account.

Given this scenario, what is the correct way of recording entries until that accounts receivable hits 0 balance?

JessT · ‎May 30, 2020

This is actually possible, pennvestor. I'll guide you through the steps.

There are cases when a vendor is also a customer, and the balances are being offset. In your case, I presume your vendor is also your customer because they owe you money. I also presume that you have created them a customer profile in QuickBooks.

The first thing we'll do is create a clearing account. This is a bank type with zero balance and is used to move balances from A/R to A/P or vice versa. In your case, you will transfer the balance from A/R to the Clearing Account, then from the Clearing Account to A/P. This will turn the balance as credits to the vendor and will be used to pay their bills.

The next step is to pay the bills using the credits, like in the screenshot below.

If you need more help, feel free to go back to this thread. We'll be more than happy to help you again.

View solution in original post

JessT · ‎May 30, 2020

This is actually possible, pennvestor. I'll guide you through the steps.

There are cases when a vendor is also a customer, and the balances are being offset. In your case, I presume your vendor is also your customer because they owe you money. I also presume that you have created them a customer profile in QuickBooks.

The first thing we'll do is create a clearing account. This is a bank type with zero balance and is used to move balances from A/R to A/P or vice versa. In your case, you will transfer the balance from A/R to the Clearing Account, then from the Clearing Account to A/P. This will turn the balance as credits to the vendor and will be used to pay their bills.

The next step is to pay the bills using the credits, like in the screenshot below.

If you need more help, feel free to go back to this thread. We'll be more than happy to help you again.

s_arm_strong_777 · ‎September 17, 2020

I found this answer and it's great! (https://www.softwarediscountcenter.com/quickbooks-help/2009/07/02/ask-the-quickbooks-specialists-how....)

I could use some assistance in a transaction. I have a client that I also buy marketing events from. I am using my invoicing to pay for my events. It was suggested to me, to run both invoices and receipts through the clearing account, but I’m not quite sure how to do that. The client doesn’t submit bills–should I create them? Thanks for your help.

Here’s the process for using a clearing account to offset the accounts receivable owed to you with the accounts payable owed from you, when you have a customer who’s also a vendor:

   1.   Go to Lists > Chart of Accounts, click on the Account button, select New and create a new bank account called Clearing Account.

   2.   If not entered already, enter the invoice (Customers > Create Invoices) and bill (Vendors > Enter Bills) you want to offset. QuickBooks won’t let you use the same exact name for both a customer and a vendor so you’ll need to change them slightly

3. Go to Vendors > Pay Bills, select the bill you want to pay and enter the amount you want offset by what your customer/vendor owes you. If it’s less than the entire amount of the bill, change the amount in the Amt to Pay box. Use the Clearing Account as the account. You may also want to use something like Offset for the Check No.

4. Go to Edit > Preferences > Sales & Customers > Company Preferences and uncheck the box next to Use Undeposited Funds as the default deposit to account

5. Go to Customers > Receive Payments, select the customer account for your customer/vendor, enter the amount you want offset by what you owe, deposit to the Clearing Account, and select the invoice you want to apply the payment to

6. The Clearing Account should always have a $0 balance so make sure that the amounts you entered in Pay Bills and Receive Payments exactly match.

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Adjust payment to Vendor Bills with Accounts Receivable