Managing Bills in QuickBooks

Managing bills in QuickBooks is a great way to keep track of what your business owes its vendors. The two main features are the ‘Enter Bills’ and ‘Pay Bills’ window. Whether you keep the books on a cash or an accrual basis, you should take advantage of this feature. It will help you manage your bills and keep them paid on time. I have always liked this feature because I don’t have to wait until a bill has been paid to enter it in the books. It also helps when it comes time to reconcile your bills with statements from your suppliers, utility companies, etc.

It is important to know that in QuickBooks, the term ‘Invoice’ refers to a bill you send your customer. The term ‘Bill’ refers to bills you receive from your vendors.

To get started, go to the ‘Vendors’ menu at the top of QuickBooks and choose ‘Enter Bills’. This is where you will enter the information from invoices you have received. You will notice above the bill entry form you can choose ‘Bill’ or ‘Credit’. So, this is the same window you will use to enter credits from vendors.

Select a Vendor

The first thing to do here of course is to select the correct name from your Vendor List. If you haven’t entered a name yet you can do that from within this window by selecting ‘<Add New>.” from the top of the list that appears when you click the drop down arrow.

Terms, Invoice Number & Memo

You can choose from a list of pre-filled terms or add one of your own. Selecting the correct terms is important as you will see in the ‘Pay Bills’ window since it will give you the correct due date when selecting bills (invoices) to pay. The ‘Ref. No.’ field is for anything you would like to enter, but is normally where you enter the invoice number for the specific bill you are recording. This is the reference number that will appear in your list of bills to pay in the ‘Pay Bill’s window. The memo line can be used for anything you would like to enter, but can also be left blank.

Expenses & Items Tabs

The bottom half of the window is divided into two tabs. This is where you will enter the specific items from the invoice you are recording. The first tab is for Expense and the second if for Items. How do you know which tab to use? The expense tab is used when you want to record items directly to an expense account in your chart of accounts. The Items tab is used when you have vendor items pre entered in your item list in the software to make it easier to record bills. A business would have an item list for things it orders over and over and also for items that will be used to create a finished product that will be billed to a customer.

For example, some businesses such as manufacturing companies order the same parts over and over again. These parts come together to create various finished products for sale. Other businesses have certain expenses or costs that are billed to customers with a markup. Having these items in QuickBooks speeds up the process of entering bills. It also makes it easier to bills these items to customers on invoices. For items like this, you would select the ‘Items’ tab and enter each of the items from the invoice, the quantity and final invoiced amount for each item. If invoicing customers for these items you would also select the customer name and job and then place a check mark in the ‘Billable?’ column. Later when creating invoices for customers, you will be able to select these billable items from a list making it easier to create customer invoices.

The ‘Expenses’ tab will be used for any items that are not kept in the inventory ‘Item’ list. This would include office, utility, bank expenses etc. Even though the tab is for ‘Expenses’ it can be also used for catch-all cost of goods sold accounts such as materials or parts, where it is not important or not reasonable to do so. One example would be materials for construction. A construction company that builds homes or does remodeling would not want to keep everything it purchases in an inventory list since the items used would vary greatly from project to project and most likely so would the cost.

Recalculate and History

The recalculate option is for when you go back to a bill to make some corrections to individual items or expenses. Clicking this button will recalculate the bill total for you automatically which will be reflected in the ‘Amount Due’ field near the top. The ‘History’ option will show you when the bill was paid and when and how it was paid.

Pay Bills

When it is time to pay some of your Vendor Bills, you will go to the ‘Vendors’ menu and select ‘Pay Bills’. This will open the ‘Pay Bills’ window where you will see a list of all bills you have entered that have yet to be paid. You can sort them by due date, discount date, vendor or amount due.

To pay a particular bill you place a check mark next to it in the first column just to the left of the ‘Date Due’ column. The Amount to pay in the far right column will be automatically calculated by the amount due on that bill. You can change the amount manually if you want to. If you would like to see the details of a bill before you pay it, you can select the ‘Go to Bill’ button in the lower left section of the window.

If you select more than one invoice for a particular vendor, only one check will be created when you choose the ‘Pay Selected Bills’ at the bottom of the window.

Applying Discounts and Credits

If paying early to receive a discount, you will select the bill you are paying first. When you do this, you will notice an amount appearing above the ‘Set Discount’ button. When paying early and receiving a discount you need to choose ‘Set Discount’ and select the ‘Discount’ tab and the correct ‘Discount Account’.

If you have received any credits from the vendor you are paying, select the ‘Set Credit’s’ button and select which credits to apply to the invoice you have selected. If the amount of your credit is greater than the invoice you are paying, the amount of the credit unused will remain until you apply it to another invoice.

Payment Date and Method

At the bottom of the window you can select the date for the payment to be made. You can set your QuickBooks company preference to always change the check date to the date of printing or have the software only print the date you originally applied to the payment. If you are paying by check or debit card or cash, you want to choose ‘Check’ as your Method of payment and then choose the correct ‘Account’ the payment is being made from. If you are paying by credit card, then select ‘Credit Card’ from the ‘Method’ list and the correct account from the ‘Account’ list.

The ‘To be printed’ option is only used when you will be printing your checks from within QuickBooks. If you are manually writing a check, paying with cash or debit card, then select ‘Assign check number’ before paying the selected bills. Bill payments can be recorded after the fact as well. You can select to pay as many invoices from as many vendors as you wish before clicking on the ‘Pay Selected Bill’s’ button. When you do, a check for each vendor will be created for the amounts you entered to pay.