How to record disbursements(payments made to a third party on behalf of a client) on quickbooks

Welcome to the Community, sheila47!

Iv' got the steps on how you can record payments made on behalf on your client.

When receiving a payment from a third-party, you can set up them up\ as a customer so you can keep track of the payments.

Let me guide you how:

1. From the Sales menu, select Customers.
2. Enter their information.
3. Click Save.

Then, record a Journal Entry to distribute the payment from the third-party to the correct customers:

1. Select Journal Entry from the + New button.
2. Enter the Date the payment was received.

3. On the first line, select the Account drop down and choose Accounts Receivable.

4. In the Debit field, enter the full amount of the payment.

5. Enter a Memo for the journal entry.

6. Select the Name drop down and select the third-party name. 

7. On the second line, select the Account drop down and select Accounts Receivable.

8. In the Credit field, enter the payment amount for the client.

9. Select the Name drop-down and choose the name of the customer where the payment is being transferred. 

10. Click Save.

Now, you'll have to enter the payment from the third-party to deposit the funds and clear out their  balance you just added.

1. On the + New button, select Receive payment.
2. For Customer, select the collections agency.
3. Enter the collection Payment date and for Amount received, enter the total of all the cleared outstanding balances.
4. Under Outstanding Transactions, make sure the appropriate amount are checked off.
5. If you have to deduct commission from the total amount paid, mark the deposit account as Undeposited Funds.
6. Select Save.

Lastly, apply the credit created by the journal entry to close your client's charges:

1. Click the + New button at the top and then Receive Payment.
2. Select the client with the appropriate outstanding balance.
3. Enter the Payment date you want to show the payment received by, but leave blank the Amount received field.
4. Next to Credits, select the plus + sign and choose the journal entry entered for the collections agency.
5. Under Outstanding balances, select the appropriate open invoices.
6. Select Save.

Also, if you want to ensure that your transactions matches with what your bank recorded, you can reconcile the account. Here's an article as your guide: Reconcile an account.

That should do it, sheila47. Feel free to update me if you need further assistance. I'll be your personal QuickBooks guide. Have a good day!

Hi Adrian,

We have the same scenario but, "we are the one paying the third party on behalf of our client". So, once the job is done, we are invoicing the client, we re-charge the amount that we have paid on their behalf and the add our service fees/charges.

We want it not to reflect as income and not to reflect as expenses because we just paid on their behalf (we are charging them back). 

We tried the expense - billable to the customer - but it reflects as expenses in the reports. 

May we know how to accurately make an entry for this?

I have a similar question. We have a property management company. Our property owner pays us and we deposit the check. With that money we then pay a repairman for maintenance. How can this be recorded without showing as income? 

Hi, thanks for chiming in on this thread, @EM1111. 

In QuickBooks Online, you can create an Expense to accurately record transactions where you pay a third party on behalf of your client. I'd be more than happy to walk you through the process.

1. Click the +New button, then select Expense.
2. Select the name of the repairman from the Payee dropdown. If you haven't set them up in QuickBooks, select + Add new.
3. Choose a Payment Account, Payment Date, and Payment Method for the transaction.
4. In the Category column, choose the expense account to record the fee and enter the amount.
5. Select Save and Close.

Please refer to this article to learn more about expenses: Enter and manage expenses in QuickBooks Online.

You can also run reports to review your transactions. Check out this article for the process: Run reports in QuickBooks Online.

Should you need further assistance creating an expense, feel free to leave a reply. I'm always happy to help. Have a nice day!

How can we set-up a "Disbursement" category in QBO so invoices can show line items of chargebacks to customers for the cost of items to be past on to the customer?  These line items cannot show as income in any reports, rather they were just items purchased on behalf of the customer and past on at cost.  This is typical, for example, for a repairman that purchases items that aren't an expense to the business but just the materials the customer would have otherwise purchased themselves.  The business should not show this as income.

I'm glad to assist you in setting up a disbursement category in QuickBooks Online (QBO) for line items that represent chargebacks to customers without showing them as income, @Tom713.

We can create an account under the Other Current Assets in your Chart of Accounts. We'll link this to the service item which we will be creating too.

Let's set up the Other Current Assets account first. Here's how:

1. Log in to your QBO account and navigate to the Chart of Accounts. You can find this under the Accounting or Settings menu.
2. Click on New to create a new account.
3. In the Save account under and Tax form section dropdowns, select Other Current Assets.
4. Give the account a name, such as Customer Disbursement, Pass-through Costs, or whatever you want to call it.
   
   
    
5. Optionally, you can provide a description or additional details about the account.
6. Hit on Save to complete the setup.

Next, let's create a service item:

1. Go to the Sales menu then select Products and services.
2. Click on New to create then select Service.
3. Name the service.
4. Under the Income account, select the account we created earlier. In my example, I'll choose Customer Disbursement.
5. Hit on the I purchase this purchase product/service from a vendor option. 
6. Under Expense account dropdown, select Customer Disbursement.
   
   
    
7. When done, hit on Save and close.
8. Repeat the steps if you need to create more service items.

Now when creating your invoices, you just have to select the created service item that is linked with the Other Current Assets account. 

Moreover, I'll be including this helpful article to help you show specific accounts or customers on your reports and even format the layout so the right data show up: Customise reports in QuickBooks Online. 

Please reach out to me if you have any other issues or concerns in managing your invoices, and I'll get back to you. I'm always here to help. Have a good one!