How can I link a vendor credit to a customer payment for their invoice? The vendor is a different company than the customer.

You can not, QB keeps purchases and sales separate

Why would you?

If you got a credit, and want to refund the customer, do so from your bank account or give the customer a customer credit.

Perhaps there is a better way? We have a customer who is financing through a vendor of ours. Instead of being paid from the vendor, we received a credit from them. I want the invoice from the customer to show as paid. With no money being transferred, I assumed we would need to link the credit from the vendor to the invoice for the customer?

Hello danielle17, I have the same situation with my invoices paid by warranty from my vendor by credits on my term account. I make the supplier credit billable to reduce the customers invoice to zero. And no exchange takes place plus the vendor account balances. Hope that helps

I have a very similar issue I need help with.

We do repair work for customers then invoice the vendor who warrantys the product. The vendor "pays" that invoice with a credit we can apply to our payables from them. I understand how to apply a vendor credit in payables, but how can I also apply the credit as payment to the warranty invoice? That credit is income that covers our labor cost.  I would appreciate ANY help with this! Thanks in advance 🙂

Thanks for following this thread, LMC-1.

As mentioned by Rustler, QuickBooks keeps purchases and sales separate. This is to ensure your records are in correct order.

For an overview of how QuickBooks handles customers and vendors’ transactions, see the following guides. You’ll find articles on how to perform each process in QBO.

• Sales and customers
• Expenses and vendors

Reach out to me if you have any clarifications or other concerns. I’ll be around to help and make sure you’re taken care of.

Thanks for your reply! I understand all of that. I may not be expressing my problem clearly. Bear with me.  I still have an invoice for labor I need to apply payment to. That payment is given to us in the form of a vendor credit. How do I post a vendor credit as a payment? As opposed to a check or credit card? Do I need to create an income  account for vendor credits? 

Thanks for posting here again, @LMC-1,

Currently, we're unable to apply vendor credits into sales transactions. If you receive a vendor credit, you can only apply it to expenses or bills. It also has to have the same category, product, or service you’re getting a credit for.

If you want to record a customer payment, it has to be done separately. If you don't have a bill attached to the vendor credit, you can simply create a bank deposit to show the return of funds in the register. Here's how:

1. Click the + New icon and choose Bank Deposit.
2. Under Add funds to this deposit, add the refund account in the Account column.
3. Adding a vendor name (third-party payor) in the Received From window is optional, you can leave it blank if you want.
4. Add the amount you received and the payment method.
   
5. Once done, press Save and new or Save and close.

Then, you can apply this deposit towards the invoice by linking them. Please see this article for the steps: How to link a deposit to an invoice.

Please let me know how this goes. I'm here if you need further help. Wishing you a great and productive day!

I am curious about this as we track job costs through vendor invoices. Charges from Vendor A are logged against the Smith job. Vendor A issues a credit for returned material. Quickbooks Online records it as a deposit but I need it to be a credit against the job. Is that possible?

Thank you!

Thank you for visiting the QuickBooks Commuity, rowens2022.

Please know that recording credit to a vendor depends on how you record your purchases. With this, you can open the vendor credit that you've created and you have the option to choose the correct project or job from there. This way, the deposit will credit against or applies to the job. I've attached a screenshot below for visual reference.

Lastly, you may refer to this article to see steps on how you can run specific reports that will reflect all payments made to vendors: Run a report with vendor totals.

If there's anything else that I can help you with regarding your vendor and project transactions in QBDT, please let me know in the comment below. I'll be here to lend a hand, rowens2022. Stay safe!

We do job costing and have properly recorded both the vendor bills and the credits to the correct job and made them billable, but when we invoice the customer, the credits are not pulling through.  Why is this?

Let's figure out the cause of why vendor credits aren't pulling through when invoicing your customer, Julie.

When creating your vendor credits, you'll need to ensure you've reviewed all the details entered from this transaction to allow its data to show when linked to an invoice. You'll want to open the credits created and make sure the customer from this entry is similar to the customer you want to invoice it with. Also, you'll have to ensure the billable option is enabled.

Once done, you may apply the charge created when invoicing your customer. I've also added screenshots for reference. Here's how:

1. Go to the +New icon and select Invoice.
2. Choose the specific customer.
3. Click on Add for the billable expense transaction appearing from the Add to invoice window.
4. Review all information. 
5. Then, click Save and close.

Moreover, I'm sharing this reference to help you review your business finances:  Run reports in QuickBooks Online.

Let us know in the comments below if you require additional assistance managing your transactions. We're always ready to back you up for further help. Keep safe and have a good one!

I originally posted this question in 2020. I have a solution that is working for me, so I thought I would share it.  I'm not a CPA so be sure to check with your CPA to see if this will work for you.   

I create two journal entries that are as follows (QB Desktop 2020):

1.  If you don't already have a wash account, set up a new bank account that is called "Wash Account" 

2.  Go to the "Company" tab at the top of the screen and select "Make General Journal Entries" from the drop-down list

3. Date and number your first entry 

4. Under the "Account" drop-down select "Accounts Payable". 

    In the "Debit" column enter the amount of your vendor credit. 

    In the "Memo" column enter the credit # and any other notes you feel are important

    Under the "Name" column select the vendor you received the credit from.

    Go to the next line under the "Account" drop-down again. Select "Wash Account" 

    In the "Credit" column enter the amount of your vendor credit again. 

    At the bottom of the screen click "Save and New"

5. Date and number your 2nd entry.

6. Under the "Account" drop-down select "Accounts Receivable". 

    In the "Credit" column enter the amount of your vendor credit. 

    In the "Memo" column I enter the credit # again, and any other notes I feel necessary.

    Under the "Name" column select the customer whose invoice you want to apply the credit to.

    Go to the next line under the "Account" drop-down again. Select "Wash Account" 

    In the "Debit" column enter the amount of your vendor credit again. 

    At the bottom of the screen click "Save and Close". 

7.  Now you can go to the customer's invoice you want to credit and apply the credit amount to your 

    customer's invoice. 

8. In accounts payable the credit should show up when you pay a bill from that vendor. You can apply it like you do with a normal credit memo.  

I attached examples of my entries.  I hope this is clear enough. Kudos to all of the people who reply to topics with step-by-step directions! It's tricky and very much appreciated!

I did this and it worked perfectly!  I used a Cash Clearing Other Asset account 

Thank you for the suggestion!!

I'm so glad it helped you! Thanks for the reply!