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Brandi11_2
October 19, 2018
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Have a customer that is also a vendor, The customer pays my invoice but deducts the amount for their vendor bill, How should this transaction be entered / accounted for?

  • October 19, 2018
  • 8 replies
  • 0 views
I invoice a customer for services. I also purchase a product from that customer that is not related to services that customer is billed for. They send me an invoice for that product. When the customer pays my invoice they deduct the amount for the product I purchased(the amount of this invoice I received from them). Example: Customer B invoice #10 $500
                 Vendor B Bill #A2 $300
when I receive check from Customer B it will be for $200 paying invoice #10 with bill #A2 already deducted
How do I mark this invoice paid and mark the bill paid?
    Best answer by Raywhite28

    Create a Bank Account called Transfer A/R & A/P

    Enter the Bill in the Enter Bills Screen

    Use the Pay Bills & at the bottom use the New Transfer Account you created. Enter the amount paid.

    Customer Center > Receive Payments Screen. Enter what they are deducting > make sure it goes to Undeposited funds

    Make a deposit > Deposit the amount into the Transfer A/R & A/P account.

    This will zero out the account.

    8 replies

    Raywhite28
    Raywhite28Answer
    October 19, 2018

    Create a Bank Account called Transfer A/R & A/P

    Enter the Bill in the Enter Bills Screen

    Use the Pay Bills & at the bottom use the New Transfer Account you created. Enter the amount paid.

    Customer Center > Receive Payments Screen. Enter what they are deducting > make sure it goes to Undeposited funds

    Make a deposit > Deposit the amount into the Transfer A/R & A/P account.

    This will zero out the account.

      D
      dmicena
      October 19, 2018
      How would the invoice portion work?  The amount of the check is less than the invoice it's paying so it will show that they still owe us money
      Raywhite28
      Raywhite28
      October 19, 2018
      Apply to the invoice what they paid. Leave the remaining balance as an open invoice.
      D
      dmicena
      October 19, 2018
      But it's really not an open invoice so how do I zero out the remaining balance
      qbteachmt
      qbteachmt
      October 28, 2018

      You reconcile the clearing bank, which should always have a $0 balance, or you didn't do the Clearing or Barter process properly.

       

      And there is no JE for the process where Names are involved. You already have Sales and Purchase data; there is no JE in addition. You use the proper functions, so that vendor name vs customer name is respected for the activity types of Purchases and Sales. A JE also bypasses your Cash vs Accrual basis reporting. You don't need more activity. You already have:

      Sales, but the payment is "virtual" as bartered.

      Purchases, but the payment is "virtual" as bartered.

       

      And Clearing Bank = 0, as wash of the funds value, not real money traded.

        L
        ljohnstone790
        October 28, 2018

        Thanks for the answer, I didn’t do clearing but will. I just follow comments from above but make clearing account. I’m new and have been entering wrong because I wanted deposits in account, I haven’t reconciled in qb because I knew something wasn’t right. Thanks hope I can go back I have a couple to do. I appreciate your response

        M
        mwailes
        March 6, 2019

        I have the same issue -- my landlord is one of my clients, so I wanted to be able to deduct the rent from any invoices. Here is what I did:

         

        1. I created a new, non-inventory, product called "Office Rent" and then created a new category called "Credit".
        2. I checked the box: "I sell the product/service to my customers." (you have to check this to allow it to be added to invoices).
        3. In the sales price, I used a negative number
        4. In the Income Account selector, I used the expense account for Rent (use the account you would assign the expense to normally)
        5. I checked the box: "I purchase this product/service from a vendor"
        6. I entered the actual cost 
        7. I associated it with the proper expense account (in my case, Rent)
        8. I assigned the prefered vendor

        This works! My expense still tracks to my expenses in my reporting. 
        I have attached a screenshot of my setup...

        1
        1231-4568-6878-477 H38
        May 28, 2019

        Online or Desktop I often run into an Employee that is also a vendor for Expense check purposes.

        In Employee file = Ann Drake

        In Vendor file       = Ms. Ann Drake

        Works and keeps you on track,  Even in reports when you see the Ms or Mr you know it is an expense not  related to payroll.

         

        The customer and vendor issue happens when you need to refund (not electronically) to the customer.   Same act.   Customer file = Big Dog Toys    

                                                  Vendor file     = The Big Dog toys

        9 times out of 10 this works, sometimes you get a bank that will not accept the check because it is not the correct business name.   In that case you put "the" on the Customer file and leave it off the Vendor file.

         

        Leilani Griffiths

        Extraordinary Bookkeeping Services

        [removed]

         

        1
        1231-4568-6878-477 H38
        July 20, 2019
        So if you agree with taking the amount the customer paid for your services and deduct if off his Vender bill You have to manual do the credit for the Vender bill.
        jecalderon
        jecalderon
        July 22, 2019

        This is a very tricky situation.  To do this correctly takes time . Different experts will explain different procedure . There is no one correct way because on my opinion will respond to your time of business category.  For example, if you are exchanging service for service will not be same as to exchange service of Inventory goods.

        In any of the cases, one step need to be taken forward. You will need to register  and differentiate Vendor and Client. You can not use the same profile for both transaction. For example, if the name of the client is  Client X, Inc.., you will enter the client list as Client X_c, Inc to describe the income activity and enter and enter the name ClientX_v under the vendor list to described the expense activity.

         

        After completing the Purchase activity from Client X,  d a delay Bill and create invoice . Then create journal entry to link the Account payable and the account receivable of these activities. Enter invoice number of  invoice and the bill  in space provided for notes.

         

        Special attention is to be taken when entering the journal entry.  Make sure that you link both profiles credit and expense relationship correctly. 

         

        I know this is cumbersome, but is the correct way specially when noting  the taxation that correspond.  In some  states this types of exchanges in services may be exempted from taxation. But not in all jurisdictions.

         

        Hope this be helpful.

         

         

         

         

        MariaSoledadG
        MariaSoledadG
        July 9, 2020

        There's another way on how you can do apply credit, Simplicity500.

         

        Ideally, you can turn on the Automatically apply bill payments option to automatically apply the credit to your bill so it will apply to the correct open bills.

         

        Here's how:

        1. Click the Gear icon at the upper right corner.
        2. Under Your Company, click Account and Settings.
        3. Go to the Advanced tab in the left panel.
        4. Select Automation and put a checkmark for Automatically apply bill payments..
        5. Click OK.
        6. Click Done.

        Once done, let's locate the credit to apply it to your bill. You can follow the steps below.

        1. Click + New.
        2. Select Pay bills or Pay bill.
        3. Select a bill for your vendor from the list. You'll see the available credit with this vendor in the Credit Applied field.
        4. Complete the rest of the fields like you normally do.

        Please check this article for detailed steps. Apply Vendor Credit To A Bill

         

        You'll want to add and match transactions after you've applied for the credit. Here's an article for the detailed steps. Categorize And Match Online Bank Transactions In QuickBooks Online.

         

        Post a comment below if you need help from us.

        S
        Simplicity500
        July 15, 2020

        Thanks so much for the reply, Maria.  I use QuickBooks 2018 Premier Nonprofit Edition.   The automatically apply bill payments is not really my issue.   I do apply any Vendor credits against Bill payments on a regular basis.  I was hoping to find a way that I could offset a Customer invoice to a Vendor Bill and thought that the method PTLLC noted in this string of responses may work for me, but it does not as no credit shows up to offset against a Vendor bill.  

         

        After lots of thought, the only workaround I can think of is that I will pay the EFT to the Vendor (Bill payment, less the Customer invoice = net EFT payment).   Then to record in QB I will pay the Vendor bill payment as per usual on Pay Bills.  Then I will pay the Customer invoice on the Customer Payment screen and then Record deposit.   Then on the bank statement (and reconciliation) every month, I will just mark the Deposit and the Payment with lines to each to get the net amount of the EFT.   Not ideal for sure, but its the only thing I can think of at the moment to get these done.  :)

        I do thank you for your response.  

        S
        s_arm_strong_777
        September 17, 2020

        Reference: https://www.softwarediscountcenter.com/quickbooks-help/2009/07/02/ask-the-quickbooks-specialists-how-to-use-a-clearing-account-when-you-have-a-customer-who-is-also-a-vendor/#:~:text=1.,bank%20account%20called%20Clearing%20Account.&text=3.,your%20customer%2Fvendor%20owes%20you.

         

        I could use some assistance in a transaction. I have a client that I also buy marketing events from. I am using my invoicing to pay for my events. It was suggested to me, to run both invoices and receipts through the clearing account, but I’m not quite sure how to do that. The client doesn’t submit bills–should I create them? Thanks for your help.
        Here’s the process for using a clearing account to offset the accounts receivable owed to you with the accounts payable owed from you, when you have a customer who’s also a vendor:

         

            1.    Go to Lists > Chart of Accounts, click on the Account button, select New and create a new bank account called Clearing Account.
            
            2.    If not entered already, enter the invoice (Customers > Create Invoices) and bill (Vendors > Enter Bills) you want to offset.  QuickBooks won’t let you use the same exact name for both a customer and a vendor so you’ll need to change them slightly

            3.    Go to Vendors > Pay Bills, select the bill you want to pay and enter the amount you want offset by what your customer/vendor owes you.  If it’s less than the entire amount of the bill, change the amount in the Amt to Pay box.  Use the Clearing Account as the account.  You may also want to use something like Offset for the Check No.

            4.    Go to Edit > Preferences > Sales & Customers > Company Preferences and uncheck the box next to Use Undeposited Funds  as the default deposit to account

            5.    Go to Customers > Receive Payments, select the customer account for your customer/vendor, enter the amount you want offset by what you owe, deposit to the Clearing Account, and select the invoice you want to apply the payment to

            6.    The Clearing Account should always have a $0 balance so make sure that the amounts you entered in Pay Bills and Receive Payments exactly match.  

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