Entering a Bill | Paying Vendors

If you told QuickBooks during the setup process that you want to track unpaid bills, also known as accounts payable, you can enter bills as you receive them. As you do this, QuickBooks keeps track of the unpaid bills.

Tip

Good, accurate recordkeeping of unpaid bills, or accounts payable, is essential if you want to do good accrual-basis accounting. Accrual-basis accounting produces more accurate financial statements than other methods.

If You haven't Previously Recorded an Item Receipt

To enter a bill, you follow one of two sequences of steps. If you're entering a bill for which you haven't previously recorded an item receipt, you follow these steps:

1. Choose the Vendors ð Enter Bills command.

   QuickBooks displays the Enter Bills window, shown in Figure 1. You'll use this window to describe the bills that you later need to pay.

   Figure 1: The Enter Bills window. Again

   

2. Use the Vendor drop-down list to identify the vendor.

3. Use the Date, Amount Due, and Bill Due fields to describe the invoice date, the invoice due date, and the invoice amount.

   Optionally, use the Terms drop-down list to identify the payment terms and the Ref. No. box to identify the vendor's reference number. Next, if you want to, go ahead and provide a memo description for the bill by using the Memo box.

4. Identify the expenses billed.

   Use the Expenses tab of the Enter Bills window to identify the expenses that the bill represents. To identify expenses, you supply the account number that should be debited, the amount, and, optionally, the memo, customer:job, and class information. The Expenses tab of the Write Checks window works the same way as the Expenses tab of the Enter Bills window.

5. Identify the items billed in the Items tab.

   Use the Items tab of the Enter Bills window to describe any items for which the vendor bills you. For example, use the Item column to identify the thing that you purchased. Then use the Qty, Cost, and Amount columns to identify what the item cost. You can also use the Customer:Job column if you're tracking bills by customers. If you have questions about how to work with the Items tab, be aware that the Items tab of the Enter Bills window works in the same way that Items tabs of other QuickBooks windows work.
   

Tip

The buttons at the bottom of the Enter Bills window — Select PO, Receive All, Show PO, Clear Splits, Recalculate, and Clear — work the same way as the similarly titled command buttons located at the bottom of the Create Item Receipts window

If You Have Previously Recorded an Item Receipt

To enter a bill when you've already recorded the receipt of the item for which the bill invoices you, follow these steps:

1. Choose the Vendors ð Enter Bill for Received Items command.

   QuickBooks displays the Select Item Receipt window, shown in Figure 2.

   Figure 2: The Select Item Receipt dialog box

   

2. To identify the item receipt for which you're now recording a bill, select the vendor from the Vendor drop-down list.

   Then, when QuickBooks displays a list of item receipts for the vendor, click the item receipt that corresponds to your bill. Next, click OK. QuickBooks displays the Enter Bills window for the item. QuickBooks fills out much of the Enter Bills window by using the information from the item receipt, as shown in Figure 3.

   Figure 3: The Enter Bills window. Yet Again

   

   Tip

   You may be able to skip Steps 3, 4, and 5 if your item receipt information correctly and completely fills the Enter Bills window.

3. Use the Date, Amount Due, and Bill Due fields to describe the invoice date, the invoice due date, and the invoice amount.

   Optionally, use the Terms drop-down list to identify the payment terms and the Ref. No. box to identify the vendor's reference number. Next, if you want to, go ahead and provide a memo description for the bill by using the Memo box.

4. Use the Expenses tab of the Enter Bills window to identify the expenses that the bill represents.

   To identify expenses, you supply the account number that should be debited, the amount, and, optionally, the memo, customer:job, and class information. The Expenses tab of the Write Checks window works the same way as the Expenses tab of the Enter Bills window.

5. Use the Items tab of the Enter Bills window to describe any items for which the vendor bills you.

For example, use the Item column to identify the thing that you purchased. Then use the Qty, Cost, and Amount columns to identify what the item cost. You can also use the Customer:Job column if you're tracking bills by customers. If you have questions about how to work with the Items tab, be aware that the Items tab of the Enter Bills window works in the same way that Items tabs of other QuickBooks windows work.

Recording a Credit Memo

You record credit memos from vendors by using the Enter Bills window, too. The only difference in recording a credit memo is that you mark the Credit button.

Recording the Receipt of Items | Paying Vendors

When you receive items from a vendor, you can record the receipt. You typically do this when you want to record the receipt of an item even before you receive a bill for the item. For example, in any business with inventory, you want to know exactly how much inventory you have in your warehouse or on your store floor. You don't want to wait to adjust your inventory records for these purchases until you receive the invoice from the vendor. In this scenario, you record when you receive items.

To record item receipts, follow these steps:

1. Choose the Vendors ð Receive Items command.

   QuickBooks displays the Create Item Receipts window, as shown in Figure 1.

   Figure 1: The Create Item Receipts window

   

2. 2. Select the vendor from whom you're receiving items from the Vendor drop-down list.

3. Select any P.O.s that you're receiving items on.

   If open purchase orders exist for the vendor, QuickBooks displays a Message box. The Message box asks whether you want to receive items against one of the open purchase orders. If the items that you receive are items that you set up on a purchase order, click Yes. When Quick Books displays the Open Purchase Orders dialog box — the dialog box just lists open purchase orders — select the one that ordered the items you are now receiving and then click OK. QuickBooks fills out the Items tab of the Create Item Receipts window by using the information from the purchase order. This automatic data entry of purchase order information should save you time if the items that you're receiving match items on the purchase order.

4. Confirm the receipt date.

   Use the Date field to confirm the date of receipt. As with the Date field in other places in QuickBooks, enter the date in mm/dd/yyyy format. Or, you can click the Calendar button that appears to the right of the Date field and choose the date from the pop-up calendar that QuickBooks displays.

5. Use the Total box to identify the total value of the order received, if available.

   QuickBooks calculates this total for you by adding up the individual item costs, so you can wait until later.

6. (Optional) Use a reference number.

   You can use the Ref. No. field to provide a reference number. For example, you may want to reference the vendor's order number.

7. (Optional) Provide a memo description.

8. Describe the items received.

   Use the Items tab to identify the items that you've received. The Items tab of the Create Item Receipts window resembles and works like the Items tab of the Create Purchase Order window. For this reason, I don't discuss how you enter, for example, item codes in the Item column.
   

9. Describe any related expenses.

   The Expenses tab of the Create Item Receipts window works like the Expenses tab of the Write Checks window. If you have questions about how the Expenses tab works.

10. Click either the Save & Close or Save & New button to save the receipt item.

    If you click the Save & Close button, QuickBooks saves your item receipt information and closes the Create Item Receipts window. If you click the Save & New button, QuickBooks saves the item receipt information and redisplays a fresh, clean, cleared version of the Create Item Receipts window. You can then use the window to describe the receipts of some other set of items.

That's about all you need to know to work with the Create Item Receipts window. Nevertheless, let me just quickly describe the half-dozen command buttons located at the bottom of the Create Item Receipts window that I haven't referenced in the earlier discussions:

• Select PO: This command button displays the Open Purchase Orders dialog box. The Open Purchase Orders dialog box lists the purchase orders open for the selected vendor. By selecting a listed purchase order, you tell QuickBooks to fill out the Item tab with the information from that purchase order or orders.

• Receive All/Clear Qtys: When labeled Receive All, this button says you've received all the items ordered on some purchase order; or when it's labeled Clear Qtys, it clears the received quantities shown in the Items tab if you've specified a purchase order. When you click this button, it changes from Receive All, into Clear Qtys, into Receive All, and so on.

• Show P.O.: This button shows the selected purchase order.

• Clear Splits: This button erases any expense or item information that you've entered in the Expenses tab or Items tab. In effect, the Clear Splits button lets you start over in recording the receipt of some item or items.

• Recalculate: This button recalculates the total amount by using the information that you've entered onto the Expenses tab and the Items tab.

• Clear: This button clears all the information that you've entered in the Create Item Receipts window, including the Expenses tab information, the Items tab information, and the vendor information shown at the top of the window.

• Time: This button opens the Select Time Period dialog box, shown in Figure 2, which you use to specify the date range of the work for which you're paying.

  Figure 2: The Select Time Period dialog box

Paying Vendors

You can make the process of tracking vendor information as simple or as sophisticated as you like. In this chapter, I assume that you're going for sophisticated. However, you can make vendor management simpler by not using purchase orders or an accounts payable system.

Tip

You decide whether to use purchase orders and whether to track accounts payable (amounts that you owe vendors) as part of setting up QuickBooks. You can also later change your decision about using purchase orders or accounts payables. To do this, you choose the Edit ð Preferences command.

Creating a Purchase Order

A purchase order serves a simple purpose: It tells some vendor that you want to purchase some item. In fact, a purchase order is a contract to purchase.

Many small businesses don't use purchase orders. But when they grow to a certain size, many businesses decide to use them because purchase orders become permanent records of items that you've ordered. What's more, using purchase orders often formalizes the purchasing process in a company. For example, you may decide that nobody in your firm can purchase anything that costs more than $100 unless he gets a purchase order. If only you can issue purchase orders, you've effectively controlled purchasing activities through this procedure.

A Real Purchase Order

To use QuickBooks to create purchase orders, follow these steps:

1. Tell QuickBooks that you want to create a purchase order by choosing Vendors ð Create Purchase Orders.

   QuickBooks displays the window shown in Figure 1.

1. Figure 2-1: The Create Purchase Orders window

   Tip

   If the Vendors menu doesn't supply a Create Purchase Orders command, QuickBooks doesn't know that you want to create purchase orders.

2. Use the Vendor menu drop-down list to identify the vendor from whom you want to purchase the item.

   The Vendor drop-down list lists each of the vendors in your Vendor List.

3. (Optional) Classify the purchase using the Class drop-down list.

4. (Optional) Provide a different Ship To address in the Ship To drop down list.

   The Ship To drop-down list displays a list of all your customers, vendors, and employees. You select the Ship To address by selecting one of these other names. After you select an entry from the Ship To list, QuickBooks fills in the Ship To address box with the appropriate information.

   Tip

   The Create Purchase Orders window supplies some standard and, I hope, familiar buttons and boxes: Previous, Next, Print, Find, Spelling, History, and Template.

5. Confirm the purchase order date.

   Initially, QuickBooks puts the current system date into the Date box. You should, however, confirm that the date that QuickBooks enters as the purchase order date is correct. This is the contract date. Often, the date sets contractual terms — such as the number of days within which the item is to be shipped.

6. Confirm the purchase order number.

   The purchase order number, or P.O. number, uniquely identifies the purchase order document. QuickBooks sequentially numbers purchase orders for you and places the appropriate number into the P.O. No. box. The guess that QuickBooks makes about the right purchase order number is usually correct. If it isn't correct, you can enter a replacement number.

7. Confirm the vendor and ship to information.

   The Vendor block and the Ship To block identify the vendor from whom you're purchasing the item and the address to which you want the vendor to send the shipment. This information should be correct if your vendor list is up to date and you've correctly used the Ship To drop-down list to identify, if necessary, an alternative Ship To address. Nevertheless, confirm that the information shown in these two address blocks is correct. If the information isn't correct, of course, fix it. You can edit address block information by selecting the incorrect information and then retyping whatever should be shown.

8. Describe each item that you want to order.

   You use the columns of the Create Purchase Orders window to describe in detail each item that you want to order as part of the purchase. Each item goes on its own row. To describe an item that you want to purchase from the vendor, you provide the following bits of information:

   • Item: The Item column is where you record the unique item number for the item that you want to buy. Remember that items need to be entered, or described, in the Item List. The main thing to know about the Item List is that anything that you want to show on the invoice — or, for that matter, on a purchase order — must be described in the item file.

   • Description: In the Description column, you describe the item that you select. You can also edit the Description field so that it makes sense to customers or vendors.

   • Qty: The Qty column specifies the quantity of the item that you want. Obviously, you enter the number of items that you want in this field.

   • Rate: The Rate column specifies the price per unit or rate per unit for the item. Note that QuickBooks uses different labels for this column depending on the type of business that you've set up.

   • Customer: The Customer column identifies the customer for whom the item is being purchased.

   • Amount: The Amount column shows the total expended for the item. QuickBooks will calculate the amount for you by multiplying the quantity by the rate (or price). You can also edit the column amount. In this case, QuickBooks adjusts the rate (or price) so that quantity times rate always equals the amount.

   • Class: In the Class column, you classify purchase order items at the item level rather than at the purchase order level.

   You enter a description of each item that should be included on the purchase order. This means, for example, that if you want to order six items from a vendor, your purchase order should include six lines of information.

9. Print the purchase order.

   The purpose of recording a purchase order into QuickBooks is to create a formal record of a purchase. You almost always want to transmit this purchase order to the vendor. The purchase order tells the vendor exactly what you want to purchase and the price that you are willing to pay. To print the purchase order, you can click the Print button. You can also print purchase orders later in a batch; to do so, save all the purchase orders that you want to create, and then choose the File ð Print Forms ð Purchase Orders command.

10. Save the purchase order.

    To save your purchase order, click either the Save & Close button or the Save & New button. If you click the Save & New button, QuickBooks saves that purchase order and redisplays an empty version of the Create Purchase Orders window so you can record another purchase order.

Purchase Order Tips and Tricks

I want to make a few more important observations:

• Not every purchase deserves a purchase order. If you're not used to working with purchase orders, it's easy to go overboard when you first start using this handy tool. Nevertheless, keep in mind that not all purchases warrant purchase orders.

• Use purchase orders to manage buying. Typically, businesses use purchase orders as a way to control and document purchases. In fact, many purchases don't really require a purchase order. Amounts that you've agreed to purchase that are documented through standard contracts, such as bills from the telephone company, the gas company, and your landlord, don't need purchase orders, obviously. In addition, modest purchases like office supplies often don't need purchase orders, either. You definitely do need a way to control these expenditures, but purchase orders are probably not the way to go.

• Consider other complementary control tools. Other budgetary controls such as "approval from the supervisor" or a simple budget often work just as well.