Record payment to vendor on behalf of another vendor

I'd like to share some steps, Elvin3.

To transfer available credits from one vendor to another, you can use a temporary clearing account. Before doing so, I'd recommend consulting with your accountant for advice. 

For adding a clearing or barter account, here's how:

1. On the left panel, click Accounting > Chart of Accounts.
2. Click the New button.
3. In the Account window, choose Bank as the Account Type.
4. Enter in Clearing Account, Barter Account, or Wash Account in the Name field.
5. Leave the Opening Balance field blank, then hit Save and Close.

Please see this sample screenshot for a visual reference:

After the steps, you can proceed with recording the Journal Entry for Vendor A. 

1. Go to + New > Journal entry.
2. Select the Journal date.
3. In the first line, select the Accounts Payable account and enter the amount in the Credits column. Then, select Vendor A from the Name field
4. Add the wash or barter account you've created on the second line and enter the amount in the Debits field.
5. Hit Save and close.

Here's a sample screenshot:

Once done, create another Journal entry for Vendor B. Make sure to Debit the Accounts Payable account and credit the wash or barter account.

Finally, apply the journal entry as a payment to Vendor B's bill. Here's a sample screenshot of what the Bill payment looks like:

I'm also adding this article in reference to paying bills: Enter bills and record bill payments in QuickBooks Online.

You're always welcome to leave a reply here if there's anything else you need. I'm just a post away to answer your questions. 

This was very helpful.  How would you tie vendor A's JE so it doesn't show as an open item?

Hello there,SAT-RGCO.

You can link the journal entry (JE) to the bill. This way, the created JE will show in the Pay Bills window as Total Credits Available. I'd suggest clicking the Credits button to apply the JE as payment and close the bill.

1. Click the open bill.
2. Click the Make payment button.
3. On the Bill Payment page, the bill is marked in the Outstanding Transactions section.
4. Go to the Credits section, then select the journal entry.
5. Hit Save and close.

I recommend this link for additional details: Enter bills and record bill payments in QuickBooks Online.

Just leave a reply if you have more questions. I'll be here to help you further.

I've got 1/2 of this right. My vendor A paid $2,000 toward my current bill from another vendor B. I followed this and made 1/2 work. My Vendor B has a payment toward bill tied to one journal entry. But, my Vendor A still shows $2,000 OPEN, related to the other journal entry. If I assign it to clearing account, there's a negative $2,000. Shouldn't I just have one journal entry for this? 

Hi there, SandraPM.

To close the bill, you'll have to link it to the journal entry.

I'll walk you through the steps. Here's how:

1. Select the open bill.
2. Hit Make payment.
3. On the Bill Payment page, make sure that the bill is ticked.
4. Go to the Credits section.
5. Select the journal entry.
6. Click Save and close.

I'd also suggest reaching out to your accountant so they can guide you on recording the transactions.

Whenever you have concerns about managing bills, you can pin this link: Review and manage bills.

Feel free to post anytime you have concerns with QuickBooks.

@SandraPM 

Yes, one journal entry is all you need.  Pay the bill from Vendor B using the Clearing Account.  Then, create a journal entry to move the -$2,000 balance in the Clearing Account where you want it to go.  If you owe $2,000 to Vendor A, debit the Clearing Account and credit A/P.  You now have a $2,000 balance due to Vendor A.

Thank you for your help, this is the right reply. However, that's where I'm at, I don't want an "open" amount on Vendor A, that money was paid directly to Vendor B. on our behalf. Each account shows:

Vendor A: Journal entry:

Accounts Payable: $2k credits, under their name.

Clearing Account: $2k debits, under no name. 

Vendor B: *I got rid of the 2nd journal entry under their name, used payment, same consequence:

Bill Payment: Selected bill and put $2k under payment toward it.

Bank/Credit Account: Clearing Account.

I'm not going to pay back Vendor A, it's a "customer appreciation" credit to us for a major error. Problem is getting the Vendor A credits to the bill payment, or what was previously a journal entry, somehow.