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Benny11_2
September 10, 2020
Solved

Purchase Order discount

  • September 10, 2020
  • 1 reply
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Hi, I am putting together a PO to send to a vendor. All of our PO are custom non inventory because we are engaged in custom fabrication of prototype HVAC systems. When I receive a quote from a supplier they ask for a PO and I fill in the product amount they have provided. I typically get a 2% discount for early payment and I want to know how I can add this to my PO. 

I have created a new product called 2% discount and it is a negative number of the total which needs to be subtracted. This creates the right amount in the subtotal but the tax rate is based off the total amounts of the line items, NOT the subtotal. 

How can I fix this? 

thanks 

Best answer by LauraAB

Hello Benny,

 

Thanks for sharing the steps you're taking to add a discount to your purchase order and why you're looking to do so. The method you've mentioned here of creating an item and entering it as a negative line item is definitely a good workaround since adding a discount to a vendor transaction isn't available in QuickBooks Online. I can see how this would throw off your totals though, and I can help with this.

 

You're right, QuickBooks Online calculates sales tax on a line-by-line basis. When you're manually entering a discount line, I usually recommend putting a zero percent sales tax code, such as Out of Scope, for situations where sales tax calculates on the total before the discount. Since you want yours to calculate on the total after the discount, you can consider putting the appropriate sales tax rate on the discount line as well. Here are a couple of screenshots so you can see the difference. I've used an inventory item in my example, but the principle is still the same.

 

Discount calculation with zero percent tax

 

Discount calculation with sales tax

 

As you can see, in using the second method, the sales tax is calculates correctly as if it were only $45 on the transaction: $45 x 0.13 = $5.85

 

If you're not sure if that's the right method for you, I recommend touching base with the CRA or an accountant. An accountant that knows QuickBooks Online would be a particularly good person to have on your side here, and you can find someone to work with using the Find a pro to help button through the My Accountant tab in the program's left menu. You can also invite someone you're already working with as a user to you account in that tab, which gives them the access and tools to help you with your books.

 

Feel free to share your thoughts and feedback using the method outlined here: How do I submit feedback? Our goal is to equip QuickBooks Online with the features bookkeepers and business owners are looking for, and the feedback helps the product development team accomplish that.

 

Wishing you the best!

1 reply

L
LauraABAnswer
September 10, 2020

Hello Benny,

 

Thanks for sharing the steps you're taking to add a discount to your purchase order and why you're looking to do so. The method you've mentioned here of creating an item and entering it as a negative line item is definitely a good workaround since adding a discount to a vendor transaction isn't available in QuickBooks Online. I can see how this would throw off your totals though, and I can help with this.

 

You're right, QuickBooks Online calculates sales tax on a line-by-line basis. When you're manually entering a discount line, I usually recommend putting a zero percent sales tax code, such as Out of Scope, for situations where sales tax calculates on the total before the discount. Since you want yours to calculate on the total after the discount, you can consider putting the appropriate sales tax rate on the discount line as well. Here are a couple of screenshots so you can see the difference. I've used an inventory item in my example, but the principle is still the same.

 

Discount calculation with zero percent tax

 

Discount calculation with sales tax

 

As you can see, in using the second method, the sales tax is calculates correctly as if it were only $45 on the transaction: $45 x 0.13 = $5.85

 

If you're not sure if that's the right method for you, I recommend touching base with the CRA or an accountant. An accountant that knows QuickBooks Online would be a particularly good person to have on your side here, and you can find someone to work with using the Find a pro to help button through the My Accountant tab in the program's left menu. You can also invite someone you're already working with as a user to you account in that tab, which gives them the access and tools to help you with your books.

 

Feel free to share your thoughts and feedback using the method outlined here: How do I submit feedback? Our goal is to equip QuickBooks Online with the features bookkeepers and business owners are looking for, and the feedback helps the product development team accomplish that.

 

Wishing you the best!

    B
    Benny11_2Author
    September 11, 2020

    Thank you Laura, 

    It is interesting to learn how quickbooks online treats different equations but at least it is worked out as this is something that we regularly have to do. 

    best regards, 

    ben 

    L
    LauraAB
    September 11, 2020

    Hi again, Benny. I'm glad to see that this solution works for you, especially since this kind of discount is common in your books. When it comes to transactions, QuickBooks handles them line-by-line, including for rounding purposes. This article sheds a bit more light on rounding specifically and although it's tagged for Payroll, it also applies to sales tax rounding in the program: Why do I occasionally notice penny rounding differences?

     

    QuickBooks is designed with government regulations in mind since we know how important it is to be compliant for remittances, so the product development team aims for precision with how the program handles the various calculations. Don't hesitate to give us a shout when questions come up about this or other things in the program. I'm here to help!

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