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bcreative
Level 2

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

Bill is for $1000, Invoice is for $100. I want to pay them $900 and clear both the Bill and Invoice.
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Best answer December 02, 2020

Best Answers
MarsStephanieL
QuickBooks Team

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

Hi there, @bcreative.

 

I'd be glad to help you deduct the invoice payment amount from your bill payment from the same person through a Journal Entry.

 

First, create a Journal Entry transaction, Credit the $100 to the Accounts Receivable account on the first line, and on the second line Debit it from the Accounts Payable account. Then, create a Receive payment transaction to apply the amount from the Journal entry to the invoice. Once done, you can create a Bill payment transaction for $900 and link the Journal Entry amount. Make sure to check the correct transactions in the Outstanding transactions and Credits fields. This is a sample data to see how it looks like.

 

 

You can also reach out to your accountant if you need further assistance with creating the journal entry. If you don't have an accountant, you can choose between the two options for you to get assistance with this:

 

If you have any more questions or concerns, please don't hesitate to tag my name in the comment section. Enjoy the rest of your day!

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9 Comments 9
MarsStephanieL
QuickBooks Team

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

Hi there, @bcreative.

 

I'd be glad to help you deduct the invoice payment amount from your bill payment from the same person through a Journal Entry.

 

First, create a Journal Entry transaction, Credit the $100 to the Accounts Receivable account on the first line, and on the second line Debit it from the Accounts Payable account. Then, create a Receive payment transaction to apply the amount from the Journal entry to the invoice. Once done, you can create a Bill payment transaction for $900 and link the Journal Entry amount. Make sure to check the correct transactions in the Outstanding transactions and Credits fields. This is a sample data to see how it looks like.

 

 

You can also reach out to your accountant if you need further assistance with creating the journal entry. If you don't have an accountant, you can choose between the two options for you to get assistance with this:

 

If you have any more questions or concerns, please don't hesitate to tag my name in the comment section. Enjoy the rest of your day!

bcreative
Level 2

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

Thank you!

Kim Perico
Level 2

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

Hello, I have the same question but for QB Premier 2020.  Would the steps be the same?  Thanks for any input!

MichelleBh
Moderator

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

We have different steps in QuickBooks Desktop, @kim. Happy to outline the detailed steps for you. 

 

I'm pleased to guide you on how to pay your vendor in QuickBooks Desktop. 

 

In QuickBooks Desktop, we'll need to create a clearing account first. This way, we can move the Accounts Payable (A/P) to Accounts Receivable (A/R). Follow the steps below: 

 

  1. Go to the Lists menu and choose Chart of Accounts.
  2. Right-click anywhere in the Chart of Accounts, then select New.
  3. Select the Bank radio button and click Continue
  4. Enter Clearing Account in the Name field. 
  5. Click Save & Close. Please do not enter am opening balance. 

 

After that, let's create two entries to move the funds accordingly. Do the following: 

 

  1. Go to the Company menu and select Make General Journal Entries.
  2. Add the AR or AP from which you are moving money.
  3. In the second column, add the clearing account you've created
  4. Complete the necessary details, then click Save & Close
  5. Create another Journal Entry.
  6. Pick the clearing account in the first line. 
  7. Add the AR or AP account to which you move money.

 

Once done, in either Pay Bills or Receive Payments, link the Journal Entries together. Do the following: 

 

  1. Go to the Customer menu and select Receive payment.
  2. Choose the customer name in the drop-down. 
  3. Check the transactions and click Apply credits
  4. Select the Journal Entry you created in the list.
  5. Click Save & Close

 

For more details, see this link: Set up a clearing account

 

Further, check out these articles below on how to handle vendors/customer credits, AP, AR, and other related matters: 

 

 

Swing by here again if you have other questions or concerns about vendor transactions. I'm always here at your back. Take care, Kim.

Kim Perico
Level 2

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

@MichelleBh - Thank you for getting back to me!  I do have a couple follow up questions.

I did the 2 JE's as indicated.  Then I went into AR and applied the credit to the 6 invoices.  When I look at the customer account, now I see the JE I entered as a credit for 1,541,393.29 with an open balance of -486,256.91.  I also see a payment on the customer account for 1,541,393.29.  I have confirmed that the invoices are now 0.  I also confirmed that the amount of the invoices matches the JE of 1,541,393.29.  Why is there an open balance?

 

I'm going to try to clear the AP transactions next week as there are 85 line items.  

Rasa-LilaM
QuickBooks Team

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

Thank you for coming back to the Community, Kim Perico.


I appreciate you for following the solution shared by my peer and informing us of the result. This information will guide us on how to correct the open balance.


We’ll have to open your Accounts Receivable (A/R) account to look for the transaction that’s causing the open balance. Let me help show you the steps to get there.


Here’s how:

 

  1. Open your company file and head to the List menu at the top bar and choose Chart of Accounts.
  2. From the list, search for the Accounts Receivable account and double-click your mouse beside it to see more details.
  3. Find the entry that's causing the discrepancy and double-click to open it.
  4. Then check if it’s marked as PAID.

 

Otherwise, tap the Receive Payments menu to pay the transaction to close it. Performing this task will decrease the balance in your A/R account.


However, if it’s already paid, download the latest maintenance release for your QuickBooks. This will resolve any issues you experiencing while working in the program and apply the critical fixes.


If none of these suggestions work, run the Verify and Rebuild Data Utilities to see if there’s data damage. These built-in tools will resolve integrity issues in the company file.


Here’s a resource that can help you organize your cash flow, and track sales, receivables, and profitability more accurately: Get started with customer transaction workflows in QuickBooks Desktop. It contains some links on how to run each process as well as screenshots for visual reference.


Keep in touch if you have any clarifications or questions on how to keep your customers balance in order. I’ll jump right back in to answer them for you. Enjoy the rest of the day. 

Kim Perico
Level 2

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

When I look at the TB for the receivable account there is a credit balance of 1,541,393.29.  This account should be zero.  I haven't cleared the payables account yet so maybe one of the entries will go away when I do?  I did 2 JE's as instructed:

Dr Clearing account 1,541,393.29 and Cr AR for the same amount with the customer name

Dr AP 1,541,393.29 with the vendor name and Cr Clearing account for the same amount

 

The clearing account is 0 so the 2 entries appear to be correct.

The payables account on the TB is 494,582.57 but I haven't cleared the payable invoices yet.  The balance is probably correct now (494k) but once I clear the 1.541m of invoices it will probably be a debit balance.  Which obviously isn't correct.

 

I'm hoping you can share some insight as to what I'm doing wrong.

 

 

Ethel_A
QuickBooks Team

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

Thank you for getting back to us and updating us with the results following the steps provided by my colleagues above, @kim. Let me share the steps to proceed and get the result you want.

 

You can now create a Receive Payment and Pay Bills transaction. This way, you can link the credits to the open invoices and open bills.

 

Follow these steps:

 

  1. Click the Receive Payments icon on the Home Page. Or, click Customers -> Receive Payments in the top menu.
  2. Enter who paid you in the Received box, payment amount, and the date.
  3. Select the payment type:
    1. If check, enter check #.
  4. Select DEPOSIT TO account.
  5. Check off the invoice to be paid.
  6. Click Save & Close button.

 

Once done, you can pay the bills. This way, you can link the credits to the open invoices and bills. Refer to this article for the detailed steps: Pay bills in QuickBooks Desktop.

 

You can also check this article for steps to record bank deposits in QuickBooks Desktop.

 

I'll be here to help if you have other questions about invoices and bills in QuickBooks Desktop.

Kim Perico
Level 2

I have a vendor that is also a customer. I owe the vendor more than they owe me. Can I pay the vendor bill for the net amount due after deducting what they owe me? How?

Thank you for all the support but I'm going to remove the entries I've made and start over.

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