Recording payment of expenses by management company on behalf of another entity

Anonymous · ‎December 10, 2018

I have a property management company (PMC) that collects the rents from my tenant and also fixes things and charges me for the expenses incurred. This is where my QB issue lies. I need to account in the books of my ownership entity (Company B) for the expenses incurred accordingly by line item. There are many reasons for this, but mainly I also want to track where the expenses went towards at year end.

To be clear, here is a direct example of what I'm talking about and I hope someone can give me a step by step of how to input this in my QB DESKTOP ENTERPRISE version:
1. Company B receives and inputs in QB as an A/P an invoice from a painter that PMC hired to paint the building.
2. However, PMC ends up paying this invoice and send Company B a memo stating that it has paid the painters invoice and Company B must reimburse the PMC.

From my understanding, people have been telling me that I should not be inputting the painters invoice in Company B and rather an invoice for the expenses from PMC. However, this does not sound correct to me because how will I track the line item and description associated with the actual expense of painting or whatever was done? I thought I need to use something like Due to/from.... please help!!!

qbteachmt · ‎December 10, 2018

"There are many reasons for this, but mainly I also want to track where the expenses went towards at year end."

Of course; we all want this :)

"To be clear, here is a direct example of what I'm talking about and I hope someone can give me a step by step of how to input this in my QB DESKTOP ENTERPRISE version:
1. Company B receives and inputs in QB as an A/P an invoice from a painter that PMC hired to paint the building."

Then you enter a Bill, because it is not yet Paid.

"2. However, PMC ends up paying this invoice and send Company B a memo stating that it has paid the painters invoice and Company B must reimburse the PMC."

Then you Change the name on that bill. Don't overthink this.

"From my understanding, people have been telling me that I should not be inputting the painters invoice in Company B and rather an invoice for the expenses from PMC."

Bills; not Invoice. You enter and pay for who you need to pay or did pay. If you thought you owed the painter, enter it for the painter. If you already know the PMC will pay, don't enter it for the Painter.

"However, this does not sound correct to me because how will I track the line item and description associated with the actual expense of painting or whatever was done? I thought I need to use something like Due to/from.... please help!!!"

Just change the name on the Bill. Later, use Pay Bills.

View solution in original post

qbteachmt · ‎December 10, 2018

"There are many reasons for this, but mainly I also want to track where the expenses went towards at year end."

Of course; we all want this :)

"To be clear, here is a direct example of what I'm talking about and I hope someone can give me a step by step of how to input this in my QB DESKTOP ENTERPRISE version:
1. Company B receives and inputs in QB as an A/P an invoice from a painter that PMC hired to paint the building."

Then you enter a Bill, because it is not yet Paid.

"2. However, PMC ends up paying this invoice and send Company B a memo stating that it has paid the painters invoice and Company B must reimburse the PMC."

Then you Change the name on that bill. Don't overthink this.

"From my understanding, people have been telling me that I should not be inputting the painters invoice in Company B and rather an invoice for the expenses from PMC."

Bills; not Invoice. You enter and pay for who you need to pay or did pay. If you thought you owed the painter, enter it for the painter. If you already know the PMC will pay, don't enter it for the Painter.

"However, this does not sound correct to me because how will I track the line item and description associated with the actual expense of painting or whatever was done? I thought I need to use something like Due to/from.... please help!!!"

Just change the name on the Bill. Later, use Pay Bills.

Anonymous · ‎December 10, 2018

@qbteachmt

Thanks for the response, but I don't think that is what I'm looking for.  I believe it isn't as simple as changing the name of the bill or invoice because then it means I paid for example the PMC for the expense.

I want to track my accounts accordingly so at year-end, or anytime for that matter, when I go look at the P&L or the vendor accounts to see how much I paid in certain expenses or to a specific vendor then I accurately would know.  In your example, if I looked up the PMC under the vendor accounts it would show the painter expense in there, however, in reality I actually did pay the painter for his services, albeit not directly.  That's what and how I am looking to track things.

Please correct me if I'm wrong to be doing this.

I will give you another similar example that is in front of me right now, which I am stumped on:

1. I've inputted a Property Tax bill for $3,000, $1,500 due 1/31/17 and the other half due 5/31/17 with Vendor being LA County Tax Collector and under Expenses the Account selected is "Taxes - Property".

2. Now let's say tomorrow I pay the first half payment of $1,500 with the credit card of the Property Management Company (PMC).

3. So now how do I account in Company B's books for the payment of its Taxes that were made by the PMC?  Do I have to make a Journal Entry to create an A/P under Liabilities that is owed to the PMC?  If so, how is this exactly recorded.

4. Lastly, I obviously have to pay back the PMC by check at some point, so when I write a check payable to the PMC what am I supposed to use as the Account under the Expenses tab when writing the check?  If I choose the "Taxes - Property" Account then it will apply the check payment to that account, however, this is where the issue lies since the PMC name wasn't what was inputted as the Vendor name with the original bill so the books would show the original bill under LA County Tax Collector as an outstanding bill.

I hope this makes sense and someone can help clarify things for me.  The whole point of me doing this and trying to figure it out is so if a lender was to request a copy of my books, financials or ledger, then they would be able to track and understand where and how payments were made for expenses.

qbteachmt · ‎December 10, 2018

"I believe it isn't as simple as changing the name of the bill or invoice because then it means I paid for example the PMC for the expense."

Yes, you told us you would be paying them.

"if I looked up the PMC under the vendor accounts it would show the painter expense in there, however, in reality I actually did pay the painter for his services, albeit not directly."

That sentence is self-conflicting. You paid for Painting. You did not pay the painter.

"Please correct me if I'm wrong to be doing this."

Never use JE for AP. Never use JE for anything we just reviewed here.

"I've inputted a Property Tax bill for $3,000, $1,500 due 1/31/17 and the other half due 5/31/17 with Vendor being LA County Tax Collector and under Expenses the Account selected is "Taxes - Property".

2. Now let's say tomorrow I pay the first half payment of $1,500 with the credit card of the Property Management Company (PMC)."

I don't know how you get to spend their funds?

"3. So now how do I account in Company B's books for the payment of its Taxes that were made by the PMC?"

You are deeply Overthinking all of this.

You pay the payee name that you paid, and you list what you paid them for. Stop going into a third-person spiral.

"The whole point of me doing this and trying to figure it out is so if a lender was to request a copy of my books, financials or ledger, then they would be able to track and understand where and how payments were made for expenses."

You do your entries to match Reality. Stop getting lost in who owed what to whom where you are not the first person or the second person between Them.

If my property manager pays my utilities, insurance, property taxes, plumber, whatever, I pay the PMC and I would list the various expense types that I know this is covering.

Rustler · ‎December 10, 2018

@ jmaghen

As I understand this

PMC pays the expense, and sends you an invoice for that expense (painting)

You enter the PMC bill, and as the expense, select your painting expense account, then pay the bill.

The vendor that did the painting, is really immaterial, but if you want you can enter that name in the memo block.
And if you have multiple properties, set up a class per property and tag the transaction with the correct class

If you are interested in better reporting, I would create non inventory type items for the different expenses (painting, plumbing, taxes, etc) and use the item tab (with or without class) on the bill or the direct payment.

Bills are optional, and usually only used when you pay it at a later date.

You should also get the actual receipt from PMC, it is your expense and you must have the receipt in the event of an audit.

Jenmeda-05 · ‎June 08, 2021

A little late to the game, but there are two ways to record this transaction. I've added additional detail to this problem.

Company B receives a bill from PMC requesting reimbursement for several expenses. Log into Company B QuickBooks. Go to Vendors > Enter Bill

- Vendor: PMC

- Ref. No.: 1 (invoice #)

- Account: Repairs and Maintenance

- Memo: ABC Painter LLC, Inv#1000, Painted unit #A

- Account: Repairs and Maintenance

- Memo: HVAC Company, LLC, Inv#500, Repaired AC unit #D

- Account: Janitorial Expense

- Memo: Janet's Janitorial and Cleaning, Inv#2001, Cleaned unit #C to prep for new tenant

You continue to add a new line item for each line item (separate invoice on PMC's invoice) that PMC is charging Company B

Save and Close

Second option

Log into Company B QuickBooks

Go to Company > Make General Journal Entries

You are going to enter each expense reimbursement on PMC's bill as a separate line item

Date: Date of PMC invoice

Account Debit Credit Memo Name (Vendor)

Repairs and Maintenance $1,000(Dr.) Inv#1000, Painted unit #A ABC Painter LLC

Repairs and Maintenance $500(Dr.) Inv#500, Repaired AC unit #D HVAC Company, LLC

Janitorial Expense $500(Dr.) Cleaned unit #C for new tenant Janet's Janitorial

Accounts Payable $2,000(Cr.) Invoice #1 PMC

This journal entry puts the PMC invoice that you received into A/P so you can go into Pay Bills and pay it like any other bill. The expenses that PMC incurred on behalf of Company B are now allocated to the vendors that PMC used. If you run a P&L and click on Janitorial expense, you'll see a line item for Janet's Janitorial $500.

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Recording payment of expenses by management company on behalf of another entity