Supplier pays our warranty claim invoice with a credit. How do i post it?

I can share some insights about how vendor credits, LMC-1.

Please know that QuickBooks Desktop tracks your vendor purchases and customer sales separately. This means that the program will recognize the vendor credit as receivable not a payment when you try to post it on the customer side. Thus, we're unable to apply a vendor credit to an open invoice.

You can only use the vendor credit as payment for an open bill. To ensure that your records are accurate, I recommend consulting an accounting professional in handling these transactions. If you don't have an accountant, you can find one here: Find a ProAdvisor.

Additionally, here's an article that you can read to help manage your vendor and customer transactions:

• Accounts Payable workflows
• Get started with customer transaction workflows

I'm just a comment away if need more help in completing your other tasks and duties. Have a great rest of the day.

I am grateful for your help but again, I understand all of that. I am still left with how to accurately mark my invoice as "paid" when I am paid with a credit. My labor needs to be accounted for and that credit is my income. How do I apply a credit as a payment on an invoice? Thank you for taking your time to help!

Let me guide you on how to apply for credit as a payment to your invoice, LMC-1.

You can follow these steps on how to it: 

1. Click Customers in the top menu bar and select Receive Payments.
2. Click the Received From drop-down arrow and select the customer's name.
3. You will see the available credit amount at the bottom of the window.
4. Select an invoice and click the Discount & Credits button/
5. Select the correct credit you need to apply from the window and adjust the amount, if needed, in the Amount to Use column.
6. Click Done.

For more information about transferring customer credit, please visit this article for more information: Transfer Customer Credit From One Job to Another. You'll want to add and match bank transactions in QuickBooks Desktop.

Fill me in if you need anything else about applying for credits. Remember, we're here to help you all the time.

Thank you so much for your reply but that does not answer the question I was asking. I really do appreciate you trying to help, though! 

I have the exact same question as you here.  Did you ever figure out a solution?

I also have the same exact question- did you ever figure it out? 

Thanks for joining us here today, @FK 314.

Let me add some insight about applying vendor credit to an invoice. As mentioned by my peer @KlentB, QuickBooks Desktop tracks your vendor purchases and customer sales separately. This means that the program will recognize the vendor credit as receivable not a payment when you try to post it on the customer side. Thus, we're unable to apply a vendor credit to an open invoice.

If you want to use the credit as payment, you'll have to create a credit memo for your customer. This way, you can apply the credit to an invoice.

Here's how:

1. Go to the Customers menu at the top.
2. Select Create Credit Memos/Refunds.
3. Choose the Customer: Job from the drop-down and then enter other credit details.
4. Click Save & Close.

After creating the credit, apply it to your invoice. 

1. Go to Customers at the top.
2. Select Receive Payments.
3. Choose the customer's name from the Receive From drop-down.
4. Mark the invoice you want to apply the credit to, then tap the Apply Credits link.
5. In the Discount and Credits window, put a checkmark on the Available Credits.
6. Click Done and then Save & Close. Below is the screenshot of how it looks like.

With the above steps, you're able to apply for the credit as payment and mark your invoice as paid. Please refer to these articles below for your reference:

• Accounts Payable workflows

• Give your customer a credit or refund in QuickBooks Desktop for Windows.

Additionally, here's a link that'll help you manage customer-related tasks: Topics about your company's income and customers.

Please let me know if you have other questions or concerns with customer payment and credits. I'm always here to help. Take care and have a great day ahead.

I do not believe this solution is correct but please correct me if I'm wrong!

This solution will only work if you receive an actual check from the vendor then you could apply the check to anything. If you receive a "vendor credit" where the credit is on your account then you will need to apply the credit to the Vendor's invoices/bills and not to your own customer invoices.

I am looking into this issue as well, the proper way to handle vendor credits for labor we perform on warranty work.

Thanks for reaching out to the Community, stheobald.
 

To properly identify if you should apply a credit to a vendor's bill or customer invoice, I'd recommend working with an accounting professional. If you're in need of one, there's an awesome tool on our website called Find an Accountant. All ProAdvisors listed there are QuickBooks-certified and able to provide helpful insights for driving your business's success.
 

Here's how it works:

1. Go to our Find an Accountant page.
2. Use your City or ZIP search field to specify a location.
3. Select Find a ProAdvisor.
4. Browse through the results and find one that works best for your business. You can click on each ProAdvisor's profile to learn more information about them.
   

Once you've found an accountant, they can be contacted through their Send a message form:

1. Use the available text box to introduce yourself. Be sure to include details about which services you're looking for.
   
2. Enter your appropriate info in the Your name, Your email, and Your phone number (optional) fields.
   
3. Hit Send message.
   

You'll also be able to find many detailed resources about using QuickBooks in our help article archives.
 

Please feel welcome to send a reply if there's any questions. Have a lovely day!

@stheobald 

Let me know if I'm not understanding the process here, but if you are getting a credit from your vendor for warranty work you performed for them as their customer, then you don't want to issue them an invoice, you want to create a vendor credit (Enter Bills>Credit) and assign the vendor credit to the appropriate income account.  This will book the work you did as income and you can apply it to a vendor bill.   

If you're an accrual basis taxpayer, the credit will book to income as of the date on the vendor credit.  If you're a cash basis taxpayer, it will book to income as of the date you apply the vendor credit to a vendor bill. 

Yes, thanks that is how I would do it but we have some vendors who want invoices for the labor and then they issue a credit. If they send a check it's easy peasy but if they issue a credit, like you said, you can only apply the credit to a future invoice. Thank you!

Let me re-phrase the situation:

Customer comes in for warranty work, exchange part under warranty, no charge to customer for part or labor (because warranty) but we do have labor which the Vendor will reimburse. We want to show the labor on the job/project and show or track hours (time spent/resources needed) and income we are earning from doing warranty work.

Vendor requests work order number or invoice number to be submitted with the claim for reimbursement ($$ for labor performed on the customer's job.)

How might this process look /work best in QuickBooks?

KEY: The vendor is not issuing us checks but issuing us vendor credits that can be applied to future invoices. I know how to enter a vendor credit and apply to bill. But how do we track these hours and income in QuickBooks.

I took accounting courses in college many years ago, so I get the credit/debit process somewhat.

Thanks for any ideas. 

Susan

Additional information are highly appreciated, @stheobald. I'll share some insights about your concern.

You can consider using QuickBooks Desktop's job costing tool to examine how much money you spend and make for each work. Follow the steps below to make sure that you have an accurate record of your job costs.

1. Set up a Customer: Job for each of your jobs.

Create a distinct job for each customer, even if you only have one assignment for them. This allows you to track your income and expenses on a job-by-job basis, which can help with bookkeeping in the future if you add another project for that customer.  

2. Assign all your expenses to jobs.

To get a complete job cost picture, make sure to assign all your expenses to jobs. Select the appropriate job in the Customer: Job column whenever you enter a bill, check, or timesheet.

• For billable time: Record the hours spent on the job, using either a weekly timesheet or a single activity entry. Assign the hours to the customer or job. Each entry is automatically checked in the Billable column on the form. Please know that timesheets are a non-posting entry. You must import time to a bill or invoice to include it in the job Profitability or Company Financial Reports.

• For job-related purchases: (items purchased for a job, subcontracted services) Use a bill, check or credit card charge to record the purchase. On the Items tab, enter each item or service you purchased. In the Customer: Job column, be sure to assign each item or service to the customer or job.

• For overhead expenses: If you choose to allocate overhead expenses to specific jobs, you can refer to this page to know more about how to calculate and track overhead costs. Please speak to your accountant before you make any changes to your company file.

• For mileage: Record the mileage in the Enter Vehicle Mileage window. If you want to change the amount for this expense ( to charge the customer more than the standard rate), you can change it on the invoice.

• For other expenses: (freight charges, postage, etc.) Use a bill, check, or credit card charge to record the expenses. On the Expenses tab, enter each expense. In the Customer: Job column, be sure to assign each expense to the customer or job.

  3. Enter your estimates in QuickBooks Desktop.

• You can create your estimates in or outside QuickBooks. If you prefer to create estimates with a spreadsheet or outside the program, you can just record summary estimates into QuickBooks.
• If you create estimates outside of QuickBooks, but you create invoices in QuickBooks, you can simply enter your invoice information in the Create estimates window and turn your estimates into Invoices.
• You can use some job costing reports without recording estimates in QuickBooks Desktop. However, entering estimates in QuickBooks allows you to use the full range of Job Cost reports to make sure your project budget is on track. You can evaluate how accurate the estimates are and adjust them appropriately for future projects.

Please keep in mind that if you record time and expenses on estimates, timesheets, or bills, you must choose one to transfer to an invoice. When adding time from an estimate to an invoice, QuickBooks Desktop, for example, will not immediately correlate time from an estimate with the same time on a timesheet. This must be done manually. You can learn how to make an estimate by reading this article. 

 4. Create appropriate invoice.

• Make sure to choose the right Customer: Job when creating invoices.
• If you prefer to create invoices outside QuickBooks Desktop, make sure to enter at least a summary of each invoices into the program so it includes the revenue in the Job Profitability reports.

  5. Run job costing reports to see how your business is doing on a job-by-job basis.

Job Reports can help you figure out which jobs are profitable and which are not. It aids in the creation of better estimates, the analysis of how each task is developing financially, and the identification of problematic jobs before it's too late to save them.

To access various job reports, here's how:

1. Go to the Reports menu.
2. Select Jobs, Time, & Mileage.

QuickBooks Premier Contractor Edition and Accountant Edition offer a wider range of job costing reports, you can find them here:

1. Go to Reports menu.
2. Select Industry Specific, and then select Contractor Reports.

You can also consider entering a timesheet and then make it billable to the project/customer.

I'll be adding a link here where you can look for an article that can assist you if you require any information or procedures when using QuickBooks Desktop. Help articles.

Additionally, here are some articles to help you in the future:

• Add, edit, and delete items
• Track job costs in QuickBooks Desktop

Don't hesitate to get back to me if you need further help with setting up projects in QuickBooks Desktop. I'll be more than willing to provide additional assistance. Keep safe and stay hydrated!

@stheobald 

I'm no genius so part of what makes this confusing is the terminology.  In QB, you send an invoice to a customer and receive a bill from a vendor.  A "vendor requesting an invoice" is confusing.  You mentioned the vendor is "issuing us vendor credits that can be applied to future invoices".  Do you mean that the vendor credits can be applied to future bills, not invoices?

Just to confirm once again (like I said, I'm no genius) what you're trying to accomplish: you invoice a customer (who is also a vendor) and, instead of paying that invoice with check/cash/ach as a customer, they issue credit as payment that can be applied against their bills issued to you as your vendor, correct? 

Is your business on cash or accrual basis?  If you're accrual, then it seems to me that you can issue an invoice that contains the income items (labor, etc) and send it to the customer.  Then, when they notify you that they are "paying" the invoice with a credit, you can discount the invoice 100% by using a discount item mapped to an asset account called "Prepaid Expenses".  This will book the income and a corresponding prepaid expense - which is really what has happened.  Now, in order to get that amount applied to the customer acting as a vendor, make a journal entry that debits A/P and credits the aforementioned prepaid expense asset account.  Make sure you list the vendor name in the "Name" field of the journal entry.  At this point, you have jumped from customer to vendor, and you have recorded your income and the vendor credit is sitting waiting to be applied to future bills from the vendor.

If you're a cash basis taxpayer, you will need a slightly different approach.  You will need to record the invoice as paid with a bank clearing account first, in order to book the income.  Then create a journal entry that debits A/P and credits the bank clearing account.         

We are dealing with a similar issue in handling manufacturer warranty repair credits from "customer" whom we invoice for warranty work that we also obtain non-warranty parts from "vendor".  Like other industries it seems that offering credits for work done is in vogue. 

Currently we have the Manufacturer  listed in our customer and vendor centers.  We are accrual bases.  

Rainflurry, 

Use of the "pre-paid expenses" account sound like good idea considering the circumstances. Would you keep the manufacturer as both customer and a vendor centers ?   Thanks for your suggestions. 

@Jgmed1 

You can record proper income and expenses without having the manufacturer as both a vendor and a customer but you cannot assign the income to the customer and the expense to the vendor without having them listed in their respective category.

IMO, the best way to handle these transactions is to enter an invoice or bill and receive payment/pay them with a temporary bank clearing account. Then, create a journal entry to move the "payment" made (in the case of bill) or "payment" received (in the case of an invoice) to a credit to be applied to a vendor bill or customer invoice 

For example, invoice the customer and receive the payment and post it to the newly-created bank clearing account.  This will book the sale.  Then, create a journal entry by debiting A/P and crediting the bank clearing account.  Make sure you include the vendor's name on the A/P line of the journal entry.  This will create a credit that you can apply to the vendor's bill.

Or you can do it the other way: Enter the bill from the vendor and pay it with that same newly-created bank clearing account.  This will book the expense from your vendor.  Then, create a journal entry by debiting the bank clearing account and crediting A/R.  Make sure to include the customer's name on the A/R line of the journal entry.  This will create a credit that you can apply to the customer's invoice.

Let me know if that doesn't work for you.

I do appreciate your attempt to help and your patience!

I do not understand because we aren't actually receiving any payment, only a vendor credit to be applied to a vendor bill. Can you break it down in preschool language for me? :) 

1-we have labor on work we do for a customer, some labor may be covered by warranty from a vendor, other labor on the job not covered. Example job: "StPat01"

2-we invoice the customer for StPat01.

---do we exclude the labor that is covered by warranty because the customer should not pay for the warranty work?

--problem, we need to track all hours on StPat01 (both warranty and non-warranty hours)

--problem, we need to show income received for work done on StPat01 (the credit is a form of income, right?)

3-file claim with vendor for warranty work on our StPat01

4-vendor issues credit for labor hours. (credit is sitting out in lala land w/Vendor)

5-apply vendor credit to another unrelated bill from vendor

So we get paid for the labor but how do we connect that to StPat01?

Thank you,

@stheobald 

I'll see what I can do.  I don’t know how to track hours on a single job between both a customer paying for non-warranty repairs and having a separate invoice sent to your vendor (acting like a customer in QB) for the warranty claim – I can only answer the original post about recording a warranty claim paid with a credit. 

Yes, correct, you are not receiving actual payment for the warranty claim.  That is why you need to create a clearing account.  This clearing account will serve as the temporary location of the faux payment until you create a journal entry to move that amount to a vendor credit that can be applied to a bill.  The clearing account can be a bank account or any other current asset account, it doesn't much matter because you are going to post the invoice payment (again, not an actual payment) to this account and then promptly move it out.  Name the clearing account something that serves only this purpose, like 'Vendor Warranty Labor Credit' or something similar so you can track down transactions if any issues arise.

Here's the process to record an invoice paid with a credit to be used toward a future bill:

1) Create an invoice for warranty hours, parts, etc.

2) Receive payment on the invoice and, under "Deposit To", select the clearing account from above.

3) Create a journal entry: debit accounts payable and credit the clearing account in Step #2.  Key point: Enter the vendor name in the "Name" column of the accounts payable line of the journal entry.

That's it.  Now, if you go to your vendor, you will see that the vendor has a credit in the same amount as the invoice waiting to be applied to a bill.