Chapter 11
Tracking and Paying Your Bills
In this chapter:
• Enter bills from your vendors
• Use purchase orders
• Receive inventory purchases
• Enter credit memos from your vendors
• Use the Memorize feature to enter recurring bills
• Track reimbursable expenses
• Pay your bills
• Write a check without entering a bill first
• Track and pay sales tax
There are two ways to pay your vendors in QuickBooks: You can enter the bill you receive from them into QuickBooks and then pay it later, or you can simply write a check without entering a bill. This chapter covers the process of entering and paying bills and also shows you how to link expenses on those bills to customers, so you can later send an invoice to the customer to be reimbursed for the expense. The process of writing a check to a vendor without entering a bill first is covered in this chapter, too.
Entering your bills into QuickBooks and then paying them in separate transactions is called accrual accounting. That means an expense is recognized by QuickBooks when you enter the bill, not when you actually pay the bill. Your Accounts Payable account should always equal the total of unpaid bills in your company file.
However, if your taxes are filed on a cash basis—where an expense isn’t recognized until you actually pay the bill—be assured that QuickBooks understands how to report your financial picture on a cash basis.
Record Vendor Bills
To enter your bills, choose Vendors | Enter Bills from the menu bar. When the Enter Bills window opens (see Figure 11-1), fill out as much information as you can from the bill you’ve just received.
FIGURE 11-1 |
The Enter Bills window has four distinct areas. |
ProAdvisor Tip: If you’re using multiple currencies, the Amount Due field uses the currency of the vendor you select, along with the appropriate amount in your currency (the multiple currencies feature covered in Appendix B).
The window has four distinct areas: the ribbon bar at the top, where you’ll find tabs and buttons for most bill payment tasks; the form section, which contains information about the vendor and the bill; the details section (at the bottom), in which you record the data related to your general ledger accounts; and a History pane on the right-hand side of the form. When you create a new bill for a vendor that you’ve done business with before, this pane will be filled with information about them, including their most recent transactions. To close this pane, simply click the arrow at the top-left corner.
The details area of the Enter Bills window has two tabs: Expenses and Items. In this section, bills that are posted directly to an Expense account are covered; assigning items to a bill is covered a bit later in this chapter with the discussion of handling the purchase of inventory items.
ProAdvisor Tip: An A/P Account field (and accompanying drop-down list) appears at the top of the Enter Bills window only if you have multiple Accounts Payable accounts. For example, some manufacturers and distributors separate payables for overhead expenses from payables to suppliers of inventory parts (usually called Accounts Payable—Trade).
Depending on the bill, you may be able to assign the entire bill to one expense account, or you may need to split the bill among multiple expense accounts. For example, your utility bills are usually posted to a single utility account (electric, heat, and so on). However, credit card bills may need to be split among numerous expense accounts, while loan payments are split between interest and principal.
Filling in the Details
In the Vendor field, click the arrow to choose the vendor from the list that appears. If the vendor isn’t on the list, choose <Add New> to add this vendor to your QuickBooks Vendors list. Then fill out the rest of the Enter Bills window as follows:
1. In the Date field, enter the bill date. The due date then fills in automatically in the Bill Due field, depending on the terms you have with this vendor.
2. Enter the vendor’s invoice number in the Ref. No. field.
3. Enter the amount of the bill in the Amount Due field.
4. In the Terms field, if the displayed data doesn’t reflect your terms with this vendor, click the arrow to display a list of terms and select the one you need. If the terms you have with this vendor aren’t available, choose <Add New> to create a new Terms entry. The Bill Due date changes to reflect the terms.
5. To enter the expense account information, click in the Account column on the Expenses tab, and then click the arrow to display your chart of accounts. Select the account to which this bill should be posted. QuickBooks automatically assigns the amount you entered in the Amount Due field to the Amount column. (See Chapter 4 to learn how to configure vendors so the posting account is automatically filled in.)
6. If you wish, enter a note in the Memo column.
7. In the Customer:Job column, enter a customer or job if you’re paying a bill that you want to track for job costing, or if this bill is a reimbursable expense. If you do select a Customer, you’ll see a check box that includes a check mark in the Billable column. You can uncheck the box with a mouse click to make the expense nonbillable while still keeping it associated with that customer for job costing purposes. (You’ll read more about tracking and charging customers for reimbursable expenses later in this chapter and in Chapter 9.)
8. If you’re tracking classes, a Class column appears; enter the appropriate class.
9. When you’re finished, click Save & New to save this bill and bring up another blank Enter Bills window. When you’ve entered all your bills, click Save & Close.
ProAdvisor Tip: If you don’t set up terms for a vendor, the due date is automatically filled out using the default number of days for paying bills. QuickBooks sets this default at ten days, but you can change the default by choosing Edit | Preferences and going to the Company Preferences tab of the Bills category.
Splitting Expenses Among Multiple Accounts
Some bills aren’t neatly assigned to one account in your general ledger; instead, they’re split among multiple accounts. The most common examples are a loan repayment where you post the interest to your Interest expense account and the principal to the liability account for the loan, or a credit card bill that covers multiple categories of expenses (see Figure 11-2). Learn more about your options for tracking credit card expenses in Chapter 12.
FIGURE 11-2 |
QuickBooks keeps recalculating, so the last account posting entry automatically has the correct amount. |
Entering a vendor bill with split expenses is basically the same as entering a vendor bill that’s assigned to one expense, until you begin assigning the expense accounts and amounts in the details section of the Enter Bills window. When you enter the first account in the Account column, QuickBooks automatically applies the entire amount of the bill in the Amount column. Replace that amount with the total you want to assign to the account you selected.
Then, on the next row, select the next account. As you add each additional account to the column, QuickBooks assumes that the unallocated amount is assigned to that account (see Figure 11-2). Repeat the process of changing the amount and adding another account until the total amount assigned to accounts equals the amount of the vendor bill.
ProAdvisor Tip: If you don’t fill in an amount for the bill in the Amount Due field, or you make a typo and the amounts in the line items don’t match the total, click the Recalculate button on the ribbon bar to have QuickBooks add the line items and insert the total in the Amount Due field.
Use Purchase Orders
Purchase orders are most often used to order inventory items or manufacturing parts from your suppliers. But if you want to issue a purchase order for services or other non-inventory items that are not for resale, such as office supplies or professional services, you can create non-inventory or service items in QuickBooks and link them to an expense account (rather than an income account) for use on a PO.
Creating a purchase order has no effect on your financial records. No amounts are posted because purchase orders exist only to help you track what you’ve ordered against what you’ve received. You create the financial transactions when the items and the vendor’s bill are received.
When you enable the Inventory and Purchase Order features, QuickBooks creates a nonposting account named Purchase Orders the first time you open the Create Purchase Order window. You can double-click the account’s listing to view and drill down into the purchase orders you’ve entered, but the data in the register has no effect on your finances and doesn’t appear in financial reports.
Create a Purchase Order
Use the following steps to create a purchase order:
1. Choose Vendors | Create Purchase Orders from the menu bar to open a blank Create Purchase Orders window.
2. Fill in the purchase order fields, which are easy and self-explanatory (see Figure 11-3).
FIGURE 11-3 |
Creating a purchase order in QuickBooks has no effect on your financial records. |
3. Click Save & New to save the purchase order and move on to the next blank purchase order form, or click Save & Close if you have created all the purchase orders you need right now.
You can print the purchase orders as you complete them by clicking the Print icon on the ribbon bar in the Create Purchase Orders window. Or, if you’d prefer, you can print them all in a batch by placing a check mark next to the Print Later option on the Main tab before saving each purchase order. When you’re ready to print the batch, click the arrow below the Print button and select Batch.
You can also e-mail the purchase orders as you create them, or e-mail them as a batch by selecting Batch from the drop-down list below the E-mail icon on the transaction window’s Main tab.
When the items and the bill for them are received, you can use the purchase order to automate the receipt of these items (covered later in this chapter) as well as the entry of the vendor’s bill.
ProAdvisor RecommendsUsing the Manufacturer’s Part Number in Purchase Orders
If the item you’re ordering has a manufacturer’s part number (MPN) in the item record, you should use that data in your purchase order to avoid any confusion. However, you have to customize the purchase order template to display the MPN data.
Choose Vendors | Create Purchase Orders to open a PO transaction window. Then use the following steps to customize the PO template:
1. On the Formatting tab on the Create Purchase Orders window, click the Customize Data Layout button.
2. In the Additional Customization window, open the Columns tab, shown here:
3. Add the Man. Part Num field to the screen, print, or both by clicking the appropriate check boxes to add a check mark (adding the field to both the screen and print versions is best).
4. Enter the column number for this column, working from left to right across the columns. For example, entering 4 puts the MPN in the fourth column. When you press TAB, QuickBooks automatically renumbers the column order to accommodate your selection.
5. Optionally, change the text that appears as the column title. By default, the title is MPN, but you might want to change it to something like Part # or Part No.
Check the Preview pane on the right side of the dialog to make sure the layout works. QuickBooks will also prompt you if the template needs additional adjustments to the layout. Adding this column doesn’t overcrowd the template, but if you previously customized the template to add columns or fields, you may have to rework your changes (see Chapter 24 to learn everything about customizing templates). If the layout looks presentable, click OK to save your changes.
Hereafter, when you create a PO for an item that has the MPN stored in its record, the data appears automatically in the MPN column.
Purchase Inventory Items
If the vendor bill you’re recording is for inventory items, there are some additional factors to consider, because the accounting issues (the way you post amounts) are different. Frequently, two transactions are involved when you buy items for inventory:
• You receive the shipment first (with a packing slip).
• You receive the bill for the items that were shipped.
Sometimes the bill comes before the products, oftentimes the items arrive first, and sometimes both events occur at the same time (the bill is in an envelope pasted to the carton or included inside the carton). If you created a purchase order for these items, you can use it to automate the receiving and vendor bill entry processes when the items and the bill arrive.
Receiving Inventory Items Without a Bill
If the inventory items arrive before you receive a bill from the vendor, you must use the Create Items Receipts window to tell QuickBooks about the new inventory. This form brings the items into inventory so they become available for resale. Use the following steps to receive inventory in this scenario:
1. Choose Vendors | Receive Items from the menu bar to open a blank Create Item Receipts window (see Figure 11-4).
FIGURE 11-4 |
Receive items into inventory without a bill using Item Receipts. |
2. Select the vendor name, and if open purchase orders exist for this vendor, QuickBooks notifies you:
3. If you know there isn’t a purchase order for this particular shipment, click No, and just fill out the Create Item Receipts window manually.
4. If you know a purchase order exists for this shipment, or if you’re not sure, click Yes. QuickBooks displays all the open purchase orders for this vendor so you can put a check mark next to the appropriate PO (or multiple POs if the shipment that arrived covers more than one PO). If no PO matching this shipment is listed on the Open Purchase Orders list for this vendor, click Cancel on the Open Purchase Orders window to return to the receipts window and fill in the data manually.
5. If a PO exists, QuickBooks fills out the Create Item Receipts window using the information in the PO. Check the shipment against the PO and change any quantities that don’t match.
6. Click Save & New to receive the next shipment into inventory, or click Save & Close if this takes care of all the receipts of goods.
QuickBooks posts the amounts in the purchase order to your Accounts Payable account as an Item Receipt type. When the bill arrives with the actual costs, the Accounts Payable account will be updated accordingly and the transaction type changed to Bill. (See the “ProAdvisor Recommends: How QuickBooks Posts Inventory Receipts and Bills.”)
ProAdvisor RecommendsHow QuickBooks Posts Inventory Receipts and Bills
Technically, an Accounts Payable liability should be connected only to a bill and not an Item Receipt (receipt of goods without a corresponding bill). In most cases, the bill you eventually receive for these goods will have the same unit cost as the Item Receipt. Sometimes, however, the cost per item listed on the Item Receipt may not be the same as the cost per item on the final bill. Whatever the reason, the bill that arrives will presumably have the correct costs, and those costs are the amounts that should be posted to the Accounts Payable account.
If this situation occurs, QuickBooks allows you to adjust the initial posting you made to A/P when you received the items, so that the new amounts match the bill. This means that on one date your Accounts Payable total and inventory valuation may show one amount, but a few days later, the amount shown is different, even though no additional transactions are displayed in reports. If the interval between those days crosses the month, or even worse, the year, your accountant might have a problem trying to figure out what happened. But now that you understand what happens, you can explain the logic behind the change.
Recording Bills for Items Already Received
After you receive the items, eventually the bill comes from the vendor. To enter the bill, do not use the regular Enter Bills window, which would cause another posting to Accounts Payable. Instead, do the following:
1. Choose Vendors | Enter Bill For Received Items to open the Select Item Receipt dialog.
2. Select the vendor, and you’ll see the current items receipt information for that vendor.
3. If you want the date of the bill to be the same as the date you received the item, place a check mark next to the Use Item Receipt Date For The Bill Date option.
4. Select the appropriate listing and click OK to open an Enter Bills window. The information from the Item Receipt is used to fill in the bill information.
5. Change anything in the Items tab that needs to be changed, such as a different cost per unit.
6. To add any shipping or handling charges, move to the Expenses tab and enter the appropriate accounts and amounts.
7. If you made any changes, you must click the Recalculate button so QuickBooks can match the total in the Amount Due field to the changed line item data.
8. Click Save & Close.
Even if you didn’t make any changes and the bill matches the receipts transaction, QuickBooks displays a message asking if you’re sure you want to save the changes. Click Yes. The message appears because you’ve changed the transaction from a receipt of goods transaction to a vendor bill transaction and QuickBooks overwrites the original postings that were made when you received the items. If you look at the Accounts Payable register (or the Inventory Assets register) after you receive the items, the transaction type is ITEM RCPT. When you save this transaction, QuickBooks overwrites the entire transaction, changing the transaction type to BILL (and also uses the new amounts if you made changes).
Receiving Items and Bills Simultaneously
If the items and the bill arrive at the same time, you can enter both into QuickBooks at the same time. To do this, choose Vendors | Receive Items And Enter Bill. The standard Enter Bills window opens, and when you enter the vendor’s name you may see a message telling you an open PO exists for the vendor. The message dialog asks if you want to receive these goods (and the bill) against an open PO.
Click Yes to see the open POs for this vendor and select the appropriate PO. The line items on the bill are filled in automatically, and you can correct any quantity or price difference between your original PO and the actuals. When you save the transaction, QuickBooks receives the items into inventory in addition to posting the bill to your Accounts Payable account.
If no PO exists, enter the item quantities and amounts. When you save the transaction, QuickBooks receives the items into inventory in addition to posting the bill to Accounts Payable.
Recording Vendor Credits
If you receive a credit from a vendor and record it in QuickBooks, you can apply it against an existing open bill or keep it unapplied so you can apply it to a future bill from that vendor.
QuickBooks doesn’t provide a separate Enter Credit window; instead, you can change a vendor bill form to a credit form with a click of the mouse by following these steps:
1. Choose Vendors | Enter Bills to open a blank Enter Bills window.
2. Select the Credit option near the top of the window, which automatically deselects Bill and changes the fields on the form (see Figure 11-5).
FIGURE 11-5 |
When you select the Credit option, the Enter Bills transaction window changes and the fields for terms and due date disappear. |
3. Choose the vendor from the drop-down list that appears when you click the arrow in the Vendor field.
4. Enter the date of the credit memo.
5. In the Ref. No. field, enter the vendor’s credit memo number.
6. Enter the amount of the credit memo.
7. If the credit is not for inventory items, use the Expenses tab to assign an account and amount to this credit.
8. If the credit is for inventory items, use the Items tab to enter the items, along with the quantity and cost, for which you are receiving this credit.
9. Click Save & Close to save the credit (unless you have more credits to enter—in which case, click Save & New).
ProAdvisor Tip: You can temporarily use the return authorization (RA) number you received on the telephone as the Ref. No. for your credit. This can help you keep track of when (or if) the actual credit memo is issued by the vendor. When the credit memo arrives, you can replace the QuickBooks Ref. No. with the actual credit memo number. Enter the original RA number in the Memo field for future reference in case there are any disputes.
Enter Recurring Bills
Most businesses have at least a few recurring bills that need to be paid every month. Typically, the list includes the rent or mortgage payment, loan payments, or a retainer fee (for an attorney, accountant, or subcontractor).
You can make it easy to pay those bills every month without entering a bill each time. QuickBooks provides a feature called memorized transactions, which you can put to work to make sure your recurring bills are covered.
Creating a Memorized Bill
To create a memorized transaction for a recurring bill, first open the Enter Bills window and fill out the information as you normally would. If the amount of a recurring bill isn’t always exactly the same, it’s okay to leave the Amount Due field blank. You can fill in the amount each time you use the memorized bill.
Before you save the transaction, click the Memorize button on the Enter Bills Main tab. The Memorize Transaction dialog opens. Use these guidelines to fill out the required information:
• In the Name field, enter a name for the transaction. QuickBooks automatically enters the vendor name, but you can change it. Use a name that describes the transaction so you don’t have to rely on your memory.
• Select Add To My Reminders List (the default) to tell QuickBooks to issue a reminder that this bill must be put into the system to be paid.
• Select Do Not Remind Me if you want to forego getting a reminder and enter the bill yourself.
• Select Automate Transaction Entry to have QuickBooks enter this bill as a payable automatically, without reminders. Specify the number of Days In Advance To Enter this bill into the system. At the appropriate time, the bill appears in the Select Bills To Be Paid section of the Pay Bills window.
• Select the interval for this bill from the drop-down list in the How Often field.
• Enter the Next Date this bill is due.
• If this payment is finite, such as a loan that has a specific number of payments, use the Number Remaining field to specify how many times this bill must be paid.
Click OK in the Memorize Transaction dialog to save the information, and then click Save & Close in the Enter Bills window to save the bill. If you want to use the bill only to create a memorized version of it, you can cancel the transaction itself before saving it.
Caution: When you select the reminders options for the memorized bill, the reminders appear only if you’re using reminders in QuickBooks. Choose Edit | Preferences and click the Reminders category icon to view or change reminders options.
Using a Memorized Bill
If you’ve opted to enter the memorized bill manually instead of having it automatically added to the Select Bills To Be Paid section, you must open it to make it a current payable. To open a memorized bill, use the following steps:
1. Press CTRL-T to open the Memorized Transaction List window or, from the Lists menu, select Memorized Transaction List.
2. Double-click the appropriate listing to open the bill in the usual Enter Bills window with the next due date showing.
3. If the Amount Due field is blank, fill it in.
4. Click Save & Close to save this bill so it becomes a current payable and is listed as a bill that must be paid when you write checks to pay your bills.
Creating Memorized Bill Groups
If you have a whole bunch of memorized transactions to cover all the bills that are due the first of the month (rent, mortgage, utilities, car payments), you don’t have to select them for payment one at a time. You can create a group and QuickBooks will automatically take action on every bill in the group. To use this feature, follow these steps:
1. Press CTRL-T to display the Memorized Transaction List.
2. Right-click any blank spot in the Memorized Transaction window and choose New Group from the shortcut menu.
3. In the New Memorized Transaction Group window, give this group a name (such as 1st Of Month or 15th Of Month).
4. Fill out the fields to specify the way you want the bills in this group to be handled.
5. Click OK to save this group.
Adding Memorized Bills to Groups
After you create the group, you can add memorized transactions to it as follows:
1. In the Memorized Transaction List window, select the first memorized transaction you want to add to the group.
2. Right-click and choose Edit Memorized Transaction from the shortcut menu.
3. When the Schedule Memorized Transaction dialog opens with this transaction displayed, select the option named Add To Group.
4. Select the group from the list that appears when you click the arrow next to the Group Name field and click OK.
Repeat this process for each bill you want to add to the group. As you create future memorized bills, just select the Add To Group option to add each bill to the appropriate group.
If you have other recurring bills with different criteria (perhaps they’re due on a different day of the month, or they’re due annually), create groups for them and add the individual transactions to the group.
Reimbursable Expenses
A reimbursable expense is one that you incurred on behalf of a customer. Even though you pay the vendor bill, there’s an agreement with your customer that you’ll send an invoice to recover your costs. There are two common types of reimbursable expenses:
• General expenses, such as long-distance telephone charges, parking and tolls, and other incidental expenses, might be incurred on behalf of a client. Those portions of the bill that apply to customer agreements for reimbursement are split out when you enter the bill.
• Specific goods or services that are purchased on behalf of the customer.
Options for Managing Reimbursable Expenses
There are two ways to manage reimbursable expenses:
• Enter and pay a bill (or you could enter a check), and then let QuickBooks automatically post the customer’s reimbursement to the same expense account selected when the bill (or check) was created. This cancels the original expense and reduces the expense total in your Profit & Loss statements, so that the expense amount reflects the net between what you paid and what you collected for reimbursement.
• Enter and pay a bill (or you could enter a check), and then let QuickBooks automatically post the customer’s reimbursement to an income account that’s created specifically for the purpose of tracking reimbursements. This lets you track totals for both expenses and reimbursements.
You may want to discuss these choices with your accountant. Many businesses prefer and use the second option—tracking the expenses and reimbursements separately—because it makes it easier to determine whether you’ve rebilled your customers correctly. The steps for this second approach are outlined in detail in the following section.
But if you prefer to reduce your expense totals by posting reimbursements to the expense account used when you entered a bill, set the Time & Expense Preference as follows:
1. Choose Edit | Preferences to open the Preferences dialog.
2. Select the Time & Expenses icon in the left pane.
3. Click the Company Preferences tab.
4. In the Invoicing Options section of the dialog, uncheck the check box next to the option Track Reimbursed Expenses As Income.
5. Click OK.
Configuring Reimbursement Tracking
To track reimbursed costs from customers, you need to enable reimbursement tracking in QuickBooks, and you must also create income accounts that are used for collecting reimbursements.
Enabling Reimbursement Tracking
To tell QuickBooks that you want to track reimbursable costs, you must enable the feature in the Preferences dialog, using the following steps:
1. Choose Edit | Preferences to open the Preferences dialog.
2. Select the Time & Expenses icon in the left pane.
3. Click the Company Preferences tab.
4. In the Invoicing Options section of the dialog, click the check box next to the Track Reimbursed Expenses As Income option to put a check mark in the box.
5. Click OK.
Applying Automatic Markups
The Time & Expenses Preferences window also has an option for setting a default markup percentage. You can use this feature to have QuickBooks automatically mark up expenses you’re linking to a customer for reimbursement. Be sure to select (or create) the default account that you want to use to track the income generated by the markup. Most businesses use something like “markup income.”
The default markup percentage is unrelated to the option to track reimbursed expenses as income. You can apply this markup whether you’re tracking reimbursed expenses as income or posting the reimbursements to the original expense account.
You can also override any automatic markup that QuickBooks applies, so filling in a percentage in this field doesn’t prevent you from setting up your own pricing formula for any individual item.
ProAdvisor Tip: The markup percentage that you designate in the Time & Expenses Preference can also be applied to the products and services that you sell. Specifically, when you enter an amount in the Cost field when you’re creating a new item or editing an existing one, QuickBooks will automatically fill in the item’s Price field by marking up the cost with this percentage.
Setting Up Income Accounts for Reimbursement
When you enable the reimbursement tracking option, QuickBooks adds a new field to the dialog you use when you create or edit an expense account. As you can see in Figure 11-6, you can configure an expense account so that reimbursements for the expense are posted to an income account.
FIGURE 11-6 |
Configure expense accounts to post reimbursements to an income account. |
Whenever you post a vendor expense to this account and also indicate that the expense is reimbursable, the amount you charge to the customer when you create an invoice for that customer is automatically posted to the income account that’s linked to this expense account.
You may have numerous expense accounts that you want to use for reimbursable expenses; in fact, that’s the common scenario. Portions of telephone bills, travel expenses, subcontractor expenses, and so on are frequently passed on to customers for reimbursement.
The easiest way to manage all of this is to enable those expense accounts to track reimbursements and post the income from customers to one account named Reimbursed Expenses. However, QuickBooks requires a one-to-one relationship between a reimbursable expense and the reimbursement income from that expense. As a result, if you have multiple expense accounts for which you may receive reimbursement (which is fairly common), you must also create multiple income accounts for accepting reimbursed expenses.
This is a one-time chore, however, so when you’ve finished setting up the accounts, you can just enter transactions, knowing QuickBooks will automatically post reimbursed expenses to your new income accounts.
The best way to set up the income accounts you’ll need for reimbursement is to use subaccounts, as shown next in the Chart of Accounts window. That way, your reports will show the total amount of income due to reimbursed expenses, and you have individual account totals if you have some reason to audit a total.
Depending on the company type you selected when you created your company file, QuickBooks may have already created a Reimbursed Expenses account in the Income section of your chart of accounts. If so, you already have a parent account, and you only have to set up subaccounts.
If you don’t already have an income account named Reimbursed Expenses, follow these steps to create the parent account:
• Open the chart of accounts by pressing CTRL-A or by clicking the Chart of Accounts icon on the Home page.
• Press CTRL-N to open the Add New Account: Choose Account Type dialog.
• Select Income as the account type and click Continue.
• In the Add New Account dialog, enter an account number (if you use numbers) and name the account Reimbursed Expenses (or something similar).
• Click Save & New.
Now that you’ve created the parent account, you can create all the subaccounts you need, using the same steps you used to create the parent account, with the following changes:
• If you’re using numbered accounts, use the next sequential number after the number you used for the parent account.
• Name the account for the type of expense you’re tracking, such as Telephone Reimbursements.
• Select the Subaccount Of check box and link it to the parent account you created.
Repeat this process as many times as necessary. Your reports show the individual account postings as well as a total for all postings for the parent account.
Don’t forget to edit any of your existing expense accounts that you’ll use to invoice customers for reimbursements. Select the account and press CTRL-E to open the account record in Edit mode. Then select the check box to track reimbursed expenses and enter the appropriate income account.
Recording Reimbursable Expenses
If you want to be reimbursed by customers for expenses you incurred on their behalf, you must enter the appropriate data while you’re filling out the vendor’s bill (or writing a direct disbursement check to a vendor for which you don’t enter bills). After you enter the account and the amount, click the arrow in the Customer:Job column and select the appropriate customer or job from the drop-down list (see Figure 11-7).
FIGURE 11-7 |
Charge portions of an expense to one or more customers by splitting the total expense among customers when you enter the vendor bill. |
Entering data in the Customer:Job column automatically places a check box with a check mark inserted in the Billable? column. The expense is charged to the customer, and you can pass the charge along to the customer when you create an invoice (covered in Chapter 9).
ProAdvisor Tip: You can click the check box to remove the check mark if you don’t want to bill the customer for the expense but you still want to track what you’re spending for the customer or the job. This disables the reimbursement feature, but the expense is still associated with the customer/job so that you can track job costs.
Sometimes a vendor’s bill is for an amount that’s not entirely chargeable to a customer. Some of the amount may be your own responsibility, and it may also be that multiple customers owe you reimbursement for the amount. (This is often the case with telephone expenses when your customers reimburse you for long-distance charges.)
Follow these steps to create a vendor bill (or a direct disbursement check if you’re not entering vendor bills) that splits expenses between you and a customer or multiple customers:
1. Select the vendor and enter the amount, date, reference number, and a memo if you wish.
2. Select the expense account, and then enter the portion of the bill that is your own responsibility.
3. In the next line, select the same account, and then enter the portion of the bill you are charging back to a customer.
4. Enter an explanation of the charge in the Memo column. When you create the invoice, the text in the Memo column is the only description the customer sees.
5. In the Customer:Job column, choose the appropriate customer or job (be sure that the Billable box next to the customer or job name is checked).
6. Optionally, assign the expense to a class.
7. Repeat steps 3 through 6 to include any additional customers for this expense account.
When you’re finished, the total amount entered should match the amount on the vendor’s bill.
Pay Your Bills
When it’s time to pay your bills, you may find that you don’t have the cash or credit available to pay every bill that’s entered, or even to pay the entire amount due for each bill.
There are plenty of opinions about how to decide what to pay when money is tight, and the term “essential vendors” is used quite often. “Essential” can be a very subjective term, since having electricity can be just as important as buying inventory items. Having worked with hundreds of clients over the years, however, I can offer you these insights:
• The government (taxes) comes first.
• Never use payroll withholding money to pay bills.
• When feasible, it’s better to send multiple vendors small checks than to send a large payment only to a couple of vendors who have been applying pressure. Vendors dislike being ignored much more than they dislike small payments on account.
Viewing Your Unpaid Bills
To see a list of each unpaid bill, totaled by vendor, choose Reports | Vendors & Payables | Unpaid Bills Detail. By default, the report is sorted by vendor name, but you can re-sort the list (using the drop-down list in the Sort By field) by bill date, due date, or open balance—to name just a few of the sort options. You may find that choosing to sort by Due Date or Aging is helpful in deciding which bills need urgent attention (see Figure 11-8).
FIGURE 11-8 |
See the details for all your unpaid bills. |
Double-click any entry if you want to see the original bill you entered, including all line items and notes you made in the Memo column.
You can filter the report to display only certain bills by clicking Customize Report and selecting the Filters tab in the Modify Report dialog. Use the filters to change what’s displayed in the report. For example, you might want to filter for bills that are more than a certain number of days overdue for “essential” vendors only. If you’re short on cash, this type of information can help you decide who gets paid so you can work out a payment plan that will maintain good relationships with your vendors.
Selecting the Bills to Pay
When you’re ready to tell QuickBooks which bills you want to pay, choose Vendors | Pay Bills. The Pay Bills window appears (see Figure 11-9), and you can make your selections by placing a check mark next to the bills you want to pay. You can also choose which open bills to work with in this window by using the filters, as described next.
FIGURE 11-9 |
Paying bills starts in the Pay Bills window. |
• Due On Or Before Selecting this option displays all the bills due on or before the date displayed. Note that the default date that’s automatically inserted in this field is ten days from the current date, but you can change the date to display more or fewer bills. If you have discounts for timely payments with any vendors, this selection is more important than it seems. The due date isn’t the same as the discount date. Therefore, if you have terms of 2% 10 Net 30, a bill that arrived on April 2 is due on May 2 and won’t appear on the list if the due date filter you select is April 30. In this case, unfortunately, the discount date is April 12, but you won’t know this because the bill won’t appear. If you want to use a due date filter, go out at least 30 days. (See “ProAdvisor Recommends: Applying Discounts for Timely Payments” later in this chapter.)
• Show All Bills Shows all the bills in your system, regardless of when they’re due. This is the safest option (and it’s selected by default), because you won’t accidentally miss a discount date. On the other hand, the list can be rather long.
• A/P Account If you have multiple Accounts Payable accounts, you’ll see an A/P Account drop-down menu. Select the Accounts Payable account that the bills you want to pay were originally posted to. You have to repeat this process for each of your Accounts Payable accounts. If you don’t have multiple Accounts Payable accounts, this field doesn’t appear in the window.
• Filter By This filter lets you choose to see open bills for a particular vendor or all vendors (the default filter).
• Sort By Determines the manner in which your bills are displayed in the Pay Bills window. The choices are
• Due Date (the default)
• Discount Date
• Vendor
• Amount Due
In the Payment section of the Pay Bills window are the following fields:
• Date This is the date that appears on your checks. By default, the current date appears in the field, but if you want to predate or postdate your checks, you can change that date. You can also tell QuickBooks to date checks on the day of printing by changing the Checking Preferences. If you merely select the bills today and wait until tomorrow (or later) to print the checks, the payment date set here still appears on the checks.
• Method The Method drop-down list displays the available methods of payment: Check and Credit Card are listed by default, but if you’ve signed up for QuickBooks online bill payment services, that payment method also appears in the list (see Chapter 16 to learn about using QuickBooks for online banking, including online bill payments).
If you are paying by check and QuickBooks prints your checks, be sure the To Be Printed option is selected. When you finish selecting payments, click the Pay Selected Bills button, and QuickBooks opens the Payment Summary dialog, where you can choose to print the checks now or wait until later. (See Chapter 14 to learn how to set up and configure check printing.)
If you prepare checks manually, select Assign Check Number, and when you click the Pay Selected Bills button, QuickBooks opens the Assign Check Numbers dialog so you can specify the starting check number for this bill-paying session.
• Account The Account drop-down list displays the checking or credit card account you want to use for these payments.
If you made changes to the selection fields (perhaps you changed the Sort By option to Discount Date), your list of bills to be paid may change. If all the bills displayed are to be paid either in full or in part, you’re ready to move to the next step. If there are still some bills on the list that you’re not going to pay, you can just select those you do want to pay. Selecting a bill is simple—just click the leftmost column to place a check mark in it. You can also click Select All Bills to select all of them and click the leftmost column to toggle off the check mark of any bills you don’t want to pay in this bill-paying session.
Paying Bills in Full
The easiest bills to pay (if you have enough cash in the bank or credit on your credit cards) are those you want to pay in full, when none of them have credits or discounts to worry about. Select the bills, and then click Pay Selected Bills.
Making Partial Payments
If you don’t want to pay a bill in full, you can easily adjust the amount by clicking the check mark column on the bill’s listing to select the bill for payment. Then move to the Amt. To Pay column and replace the amount that’s displayed with the amount you want to pay. When you press TAB, the total at the bottom of the column is recalculated (and QuickBooks reserves the unpaid balance for your next bill payment session).
Using Discounts and Credits
QuickBooks has a preference you can set to determine whether you make the decision about applying discounts and credits at the time you select the bill for payment or you let QuickBooks apply the amounts automatically to bills that you select for payment.
To set your default options, choose Edit | Preferences and select the Bills category in the left pane. In the Company Preferences tab, select either or both of the options Automatically Use Credits or Automatically Use Discounts and enter the account to which you want to post the discounts.
The account for the discounts you take (sometimes called earned discounts) can be either an income or expense account. Although there’s no absolute right and wrong here, my vote would be to recognize it as a reduction in an expense—and if that expense account is a Cost Of Goods Sold account, it means you’ll show a higher gross profit as a result of paying your bills promptly. So if you think of the discount as income—money you’ve earned by paying your bill—make the account an income account. If you think of the discount as a reverse expense—that is, money you’ve saved by paying your bills promptly—make the account an expense account. In this case it posts as a minus amount, which means it reduces your total expenses.
ProAdvisor RecommendsApplying Discounts for Timely Payments
In many cases, early payment discounts are offered by those vendors from whom you buy inventory items. Consider putting the discount account in the section of your chart of accounts that holds the Cost Of Goods Sold accounts. For example, let’s say you have a parent account called Cost Of Goods Sold. You can then create two subaccounts:
• Cost Of Goods
• Discounts Taken
Post only to the subaccounts (make sure your inventory items are linked to the Cost Of Goods subaccount). You’ll be able to see the individual amounts on your financial reports, and the parent account (Cost of Goods Sold) will report the net COGS.
QuickBooks may have created a Cost Of Goods Sold account automatically for you during your company setup. If not, you can create it and the subaccounts now.
Applying Discounts
Bills that have terms for discounts for timely payment will have a Discount Date in the Disc. Date column. If you enabled automatic application of discounts and credits, when you select the bill by clicking the check mark column, the discount is automatically applied. You can see the amount in the Disc. Used column; the Amt. To Pay column also adjusts accordingly.
If the discount isn’t applied automatically, it’s probably because today’s date is later than the discount cutoff date. Don’t worry; you can choose to take the discount anyway—see the next section, “Taking Discounts After the Discount Date.”
If you’re making a partial payment and want to adjust the discount, click the Set Discount button to open the Discount And Credits window and enter the amount of the discount you want to take. Click Done, and when you return to the Pay Bills window, the discount is applied and the Amt. To Pay column has the correct amount.
Taking Discounts After the Discount Date
Some vendors will accept a payment with the discount applied if the payment is received within a few business days of the discount period. You’ll quickly learn which vendors will accept a discounted payment and which won’t. Seeing that the discount you took has been added back in the next statement you receive is a pretty good hint that you’re not going to be allowed to take the discount the next time!
To take a discount after the discount date, select the bill for payment, and then click the Set Discount button to open the Discount And Credits window. The amount showing for the discount is zero. Enter the discount you would be entitled to if you paid the bill in a timely fashion and click Done.
Applying Credits
If you set the Preference for QuickBooks to take credits automatically (covered in the prior section “Using Discounts and Credits), when you select a bill for payment for which vendor credits exist, the amount of the credit appears in the Credits Used column, and the Amt. To Pay column is adjusted. If credits are applied automatically and you don’t want to take the credit against this bill (perhaps you want to save it for another bill), click Set Credits to open the Discount And Credits window. Deselect the credit and click Done.
If you didn’t enable automatic credit application, when you select the bill, the amount of existing credits appears below the list of bills (see Figure 11-10). Click Set Credits to open the Discount And Credits window. Make the appropriate selections of credit amounts, and click Done to change the Amt. To Pay column to reflect your adjustments.
FIGURE 11-10 |
You can choose when and how to apply a vendor credit to an open bill. |
If your total credits with the vendor are equal to or exceed the bill you select, QuickBooks does not create a check, because the bill is paid in its entirety with credits (the Payment Summary window that displays indicates an Amount Paid of $0.00).
Printing and Sending Bill Payments
When you finish selecting the bills to pay, click Pay Selected Bills. If you chose the option to print checks, QuickBooks displays a Payment Summary dialog (see Figure 11-11) that offers three choices for your next step:
FIGURE 11-11 |
You can print checks now, or wait until later. |
• Choose Pay More Bills to return to the Pay Bills window and select other bills to pay (you’ll print these checks later). Use this choice to pay bills without printing checks, such as sending payments to vendors you’ve configured for online payments.
• Choose Print Checks to print your checks now.
• Click Done to close the Payment Summary dialog, close the Pay Bills window, and print your checks later.
When you defer check printing, the bill payment checks are posted to the bank account register with the notation “To Print.” Choose File | Print Forms | Checks to print your checks.
If you selected the Assign Check Number option because you manually write checks, QuickBooks displays the Assign Check Numbers dialog.
• If you select the option Let QuickBooks Assign Check Numbers, QuickBooks looks at the last check number used in the bank register and begins numbering with the next available number.
• If you select the option Let Me Assign The Check Numbers Below, enter the check numbers in the dialog.
When you click OK, QuickBooks opens the Payment Summary dialog that displays the payments. Click Pay More Bills if you want to return to the Pay Bills window, or click Done if you’re finished paying bills.
If you’re paying bills online, select the Online Payment option when you select those bills. QuickBooks retains the information until you go online. (See Chapter 16 to learn about online banking.)
Check Writing Without Entering a Bill
You can record and print a check in QuickBooks without first entering a bill. In fact, if you’ve decided not to enter vendor bills, this is how you’ll always pay your vendors. However, even if you are entering vendor bills on a regular basis, you sometimes need to write a quick check without going through the process of first entering the bill, selecting it, paying it, and printing the check—for example, when a delivery person is standing in front of you waiting for a COD check and doesn’t have time for you to go through all those steps.
Manual Checks
If you use manual checks, you can write your checks and then tell QuickBooks about it later, or you can bring your checkbook to your computer and enter the checks in QuickBooks as you write them. You have two ways to enter your checks in QuickBooks: directly in the bank register or in the Write Checks window.
Entering Manual Checks in the Bank Register
To use the bank register, open the bank account register and enter the check directly in a transaction line, as follows:
1. Enter the date.
2. Press TAB to move to the Number field. QuickBooks automatically fills in the next available check number.
3. Press TAB to move through the rest of the fields, filling in the name of the payee, the amount of the payment, and the expense account you’re assigning to the transaction.
4. Click the Record button to save the transaction.
Repeat the steps for the next check and continue until all the manual checks you’ve written are entered into the register.
Caution: You can’t use the check register to purchase items: you must use the Write Checks transaction window. There, you can use the Items tab to tell QuickBooks exactly which items you’re purchasing.
Using the Write Checks Window
You can also use the Write Checks window to tell QuickBooks about a check you manually prepared. To get there, press CTRL-W. When the Write Checks transaction window opens (see Figure 11-12), select the bank account you’re using to write the checks.
FIGURE 11-12 |
Fill out the onscreen check the same way you’d fill out a paper check—they look the same. |
The next available check number is already filled in unless the Print Later option box is checked (if it is, click it to remove the check mark so that QuickBooks can add the check number or leave it checked and type in the number yourself). QuickBooks warns you if you enter a check number that’s already been used. It’s worth noting that the warning doesn’t appear until you fill in all the data and attempt to save the check.
Fill out the check, posting amounts to the appropriate accounts. If the check is for inventory items, use the Items tab to make sure the items are placed into inventory. When you finish, click Save & New to open a new blank check. When you’re through writing checks, click Save & Close to close the Write Checks transaction window. All the checks you wrote are recorded in the bank account register.
Printing Checks in a Batch
If you pay your bills by printing checks from the Write Checks window, by default QuickBooks saves the checks you prepare and then prints them in a batch instead of one at a time.
Open the Write Checks window and make sure the Print Later option, located on the toolbar, is selected. Fill out all the fields for the first check and click Save & New to move to the next blank Write Checks window. Continue to fill out checks, until every check you need to print is ready. Then print the checks using one of the following methods:
• Click Save & Close when you are finished filling out all the checks, and then choose File | Print Forms | Checks from the menu bar.
• In the last Write Checks window, click the arrow at the bottom of the Print button, located on the toolbar, and choose Batch.
Track and Pay Sales Tax
If you collect sales tax from your customers, you have to turn that money over to your state’s taxing authorities. Instead of using the Pay Bills feature to do this, QuickBooks uses a special system to track and pay sales taxes.
Many states have county, city, or parish tax authorities, each with its own rate. Businesses in those states may have to remit the sales tax they collect both to the state and the local sales tax authority, and the sales tax a customer pays is the total of all the taxes from these various tax authorities. As a result, tracking sales tax properly can be a complicated process.
This discussion assumes you’ve created the sales tax items you need (creating these items is covered in Chapter 5), and each item is linked to the right tax authority as a vendor.
Managing Sales Tax
QuickBooks provides a feature called Manage Sales Tax that acts as a “home page” for information and help, and offers links to reports and payment forms covered in this section. You can open the Manage Sales Tax window (see Figure 11-13) by choosing Vendors | Sales Tax | Manage Sales Tax.
FIGURE 11-13 |
The Manage Sales Tax window has links to sales tax functions. |
The menu commands needed to access features and functions are provided in the following sections, but you can also use the links on the Manage Sales Tax window for some of those chores.
Running Sales Tax Reports
At some interval determined by your taxing authority, you need to report your total sales, your nontaxable sales, and your taxable sales, along with any other required breakdowns. And, of course, you also have to write a sales tax payment check (or multiple checks) to remit the taxes.
Sales Tax Liability Report
QuickBooks has reports to help you fill out your sales tax forms. Choose Vendors | Sales Tax | Sales Tax Liability. Use the Dates drop-down list to select an interval that matches the way you report to the taxing authorities. By default, QuickBooks chooses the interval you configured in the Preferences dialog, but that interval may apply to your primary sales tax only. If you collect multiple taxes due at different intervals, you must create a separate report with the appropriate interval to display those figures. Figure 11-14 shows a Sales Tax Liability report for a monthly filer.
FIGURE 11-14 |
The Sales Tax Liability report displays taxable and nontaxable sales for each tax code. |
Tax Code Reports
If you have to report specific types of taxable or nontaxable sales, you can obtain that information by creating a report on the tax code you created to track that information. Choose Lists | Sales Tax Code List and select (highlight) the tax code for which you need a report. Press CTRL-Q to see a report on the sales activity with this tax code. Change the date range to match your reporting interval with the sales tax authority (this isn’t a sales tax report, so QuickBooks doesn’t automatically match the settings in the Sales Tax Preferences dialog).
You don’t have to create these reports one sales tax code at a time; you can modify the report so it reports all of your sales tax codes or just those you need for a specific tax authority’s report.
Click the Customize Report button on the report window. In the Display tab, use the Columns list to deselect any items you don’t require for the report (for example, the Type, Date, and Number of an invoice/sales receipt, and the contents of the Memo field).
In the Filters tab, choose Sales Tax Code from the Current Filter Choices list. Click the arrow to the right of the Sales Tax Code field and from the drop-down list, choose one of the following options:
• All Sales Tax Codes Displays total activity for the period for every code
• Multiple Sales Tax Codes Opens the Select Sales Tax Code window, listing all codes, so you can select the specific codes you want to report on
• All Taxable Codes Displays total activity for the period for each taxable code
• All Non-Taxable Codes Displays total activity for the period for each nontaxable code
Click OK to return to the report window, where your selections are reflected. Unless you want to take all these steps again when you need this report, click the Memorize button to memorize the report.
Pay the Sales Tax
After you check the figures (or calculate them, if you have multiple reports with different standards of calculation), it’s time to pay the tax, using the following steps:
1. Choose Vendors | Sales Tax | Pay Sales Tax to open the Pay Sales Tax dialog.
2. In the Pay From Account drop-down, select the bank account to use.
3. Check the date that’s displayed in the Show Sales Tax Due Through field. It must match the end date of your current reporting period (for instance, monthly or quarterly).
4. Click in the Pay column to insert a check mark next to those items you’re paying now. If you’re lucky enough to have the same reporting interval for all taxing authorities, just click the Pay All Tax button (the label changes to Clear Selections).
5. If you’re going to print the check, be sure to select the To Be Printed check box at the bottom of the dialog. If you write the check manually, or if you remit sales tax online using an electronic transfer from your bank, deselect the To Be Printed check box. Then, if you’re writing a manual check, insert the check number, and if you’re remitting online, either remove the check number entirely or enter EFT (for Electronic Funds Transfer) in the Starting Check No. field.
6. Click OK when you’ve finished filling out the information.
Caution: Don’t use the bank account register or Write Checks window to pay sales taxes. Such payments won’t be applied to your sales tax reports correctly. Instead, use the Pay Sales Tax method described in this section.
Adjusting Sales Tax Amounts
If you need to adjust the amount of sales tax due, select the appropriate sales tax item in the Pay Sales Tax window and click the Adjust button to open the Sales Tax Adjustment dialog (Figure 11-15).
FIGURE 11-15 |
You can adjust the amount of sales tax due at any time. |
Specify the amount by which to reduce the amount due—maybe for an overpayment made the previous period or to take an early payment discount offered by the taxing authority. You may also need to increase the amount due to pay a fine or penalty for a late payment. Specify an Adjustment Account and click OK to return to the Pay Sales Tax dialog, where the amount has been changed to reflect your adjustment.
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