5. Making Purchases and Recording Payments

Nearly every business engages in spending of some sort. Businesses purchase inventory items, pay rent, buy supplies, clean their premises, pay employees, purchase equipment—the list goes on and on. The tasks described in this chapter will assist you in keeping track of your expenditures and knowing how much it costs to run your business. Besides knowing how much you spend, it’s important to know how much you owe and when your payments are due. You can have all this information at your fingertips when you track your expenses using QuickBooks.

QuickBooks provides an option to use purchase order forms to record the items you have ordered so you can predict what bills you have yet to receive from the vendors. Using purchase orders also enables you to keep track of what is on order so you don’t reorder the same items. In QuickBooks, purchase order information flows directly to bills as soon as you receive the items you ordered. This way you don’t have to enter your purchase information twice. And if there are discounts available for early payment, QuickBooks calculates those for you.

You can save time by using QuickBooks to print your checks, and you can produce a variety of reports that show you how much your company is spending and what you are purchasing.

Setting Purchases and Vendors Preferences

Before you use the purchases and payments features of QuickBooks, you need to set some preferences to establish how the program will function. Some of these preferences might have been set when you used the EasyStep Interview, but it’s worthwhile to examine the preferences that are in place and make sure you are taking advantage of all QuickBooks has to offer in this area.

Set Purchase Orders and Inventory Preferences

Select Edit, Preferences.

Click the Items & Inventory icon.

Click the Company Preferences tab.

If you plan to use the inventory or purchase orders features in QuickBooks, check the Inventory and Purchase Orders Are Active box.

Check Warn About Duplicate Purchase Order Numbers to be warned that you are about to use a duplicate purchase order number.

Check the Quantity checkboxes if you want QuickBooks to reduce your available inventory totals by amounts on pending builds or sales orders.

Check Warn If Not Enough Inventory To Sell and select one of the options to receive a warning message when you try to issue an invoice for items not in your inventory.

Click Enable to enable the Units of Measure feature.

In the Unit of Measure dialog box, choose between Single U/M Per Item and Multiple U/M Per Item.

For information about Units of Measure, click Unit of Measure Overview.

Click Finish to return to the Preferences window (or click Cancel if you decide not to use Units of Measure at this time).

Set Bills Preferences

With Preferences still open, click the Bills icon and click the Company Preferences tab. If you made changes on the previous Preferences screen, you will be prompted to save those changes before proceeding.

Type a value in the Bills Are Due field to indicate how many days after receiving a bill the bill is due.

Check Warn About Duplicate Bill Numbers from Same Vendor if you want to be told you have received a bill with a duplicate number from the same vendor.

Check the Automatically Use Discounts and Credits box if you typically take advantage of discounts and credits.

If you check the discounts and credits box, you must enter an account that will be credited with your discounts and credits.

Click OK.

Working with the Vendor Center

QuickBooks provides a one-stop window where you can view all the transactions currently active with a particular vendor. You can see outstanding bills, outstanding orders, payments issued, contact information, credit limit, and account number. You can manage vendor activities from this screen, such as recording the receipt of items and bills, payment of bills, and preparation of reports.

Click the Vendor Center icon on the Navigation bar or Home page. The Vendor Center displays.

Click the Vendors tab.

Use the scroll bar to view the entire vendor list. Click on a vendor name.

Select information you want to view from the Show drop-down list.

View an original form by double-clicking the form name.

Press Esc to close the original form.

Using Purchase Documents

The purchase order feature of QuickBooks is optional, but if you like to plan ahead, using purchase orders is a good idea. As soon as you enter a purchase order in QuickBooks, the process of tracking your company’s spending begins. You can see at a glance what is on order and how much money is committed. Purchase orders make bill paying easier because the information on the order flows right to the vendor bill.

Create Purchase Orders

Open a new purchase order by selecting Vendors, Create Purchase Orders. (Remember—you must have activated Purchase Orders in the Items & Inventory Preferences to have access to the Purchase Order form.)

Click the Vendor field’s drop-down arrow to select a vendor from the existing vendor list. The vendor’s name and address appear in the Vendor area in the purchase order.

If the goods are to be shipped to a location other than your company, enter the shipping location.

If the address has changed for this vendor, enter the corrected information in the Vendor area of the form. When you close the purchase order, you are given an opportunity to make this change permanent.

Verify the date and purchase order number; revise if necessary.

Order Items on a Purchase Order

Enter the name of the item you plan to order in the Item column. A description and price will fill in if this information has been saved previously.

Enter the number of items you want to order in the Qty. column.

Verify the per item price that displays in the Rate column, or enter a price if no price displays. Leave the Rate field blank if you are uncertain.

If this order is for a specific customer, enter the name in the Customer column.

Type an optional message that will appear on this purchase order in the Vendor Message field.

Check To Be Printed to add this form to your print queue for printing later.

Check To Be E-mailed to email this form to the vendor.

Save the purchase order.

Entering Vendor Bills

From the Home page, click on the Enter Bills icon.

Select your vendor name from the drop-down list or click <Add New> at the top of the list to create a new vendor listing.

If you have an open purchase order for that vendor, click Yes to list the open purchase orders. (If not, click No and continue to Step 5).

In the Open Purchase Orders dialog that displays, place a check mark next to the purchase order.

Click OK. QuickBooks fills the items being purchased on the vendor bill from the open purchase order.

Enter or adjust the Date, Ref. No., and Amount Due.

The terms and discount will default from the original vendor settings, or you can override the terms when entering a new vendor bill.

If you are assigning a purchase order to the bill, the items tab includes the details from your purchase order. Otherwise, click on the Expenses tab and enter the account you want to assign the expense to.

Click one of the save options.

Attaching Documents to Transactions

New for QuickBooks, 2010 you can attach documents to transactions.

If this is your first time using this feature, click Company, Document Management and select Learn About Document Management. (If not, skip to step 6 or 7 after clicking the attach icon on a transaction.)

Click Sign Me Up to enable the document attachment feature (Internet connection required).

If you already have an Intuit Workspace Account, click Sign In.

You are directed to the Intuit Workplace site. Click Create Account (not shown) and follow the screen prompts to enter your email address, create a password, and provide your name and a security question.

Click that you agree with the terms and then click Create Account (not shown).

The Document Management Sign-in dialog will display. Complete your User ID and Password to begin using Document Management.

Open the transaction to which you want to attach documentation. Click the paperclip icon Attach.

Click Local Files if you are attaching a document you have stored on your local computer.

Click Online Document Inbox if you are attaching a document that has previously been scanned and saved in Document Management but not yet attached.

Click Scanner and QuickBooks will recognize your installed scanner and process the request directly from within the program.

Complete optional information for Title, Description, and Keywords.

Click View to view the attachment, Delete to remove the document, or Save File As if you want to save a copy to your local hard drive.

Click OK to complete the process.

Easily identify transactions with an attachment by the Green paperclip icon on the transaction or list item.

Reporting on Open Purchase Orders

You can prepare a report showing all outstanding purchase orders so you can easily see which items have been ordered and have yet to be received. Then it’s a simple matter to view an individual purchase order. You can change the order if necessary or indicate that all or some of the items have been received. After items are received, they are removed from the purchase order and added to your company’s accounts payable, ready for your payment.

Click the Vendor Center icon on the Icon bar or Home page.

Click the Transactions tab.

Click the Purchase Orders option.

Choose from All Purchase Orders or Open Purchase Orders in the Date drop-down list to view all orders or all open orders.

Double-click any order on the purchase orders list to view the actual order.

Press Esc to close a purchase order you are viewing.

Choose Reports, Purchases to view a menu of reports relating to your purchases.

Select Open Purchase Orders or Open Purchase Orders by Job.

Change the date at the top of the report to see items on order as of a specific date or for a particular time period.

Receiving Goods

When you receive items you ordered, those items need to be added to your inventory. Other goods you order, such as supplies, also need to be acknowledged in QuickBooks so that the outstanding purchase order can be closed and the payment process can begin. You can check the goods you ordered against the purchase order, or you can enter a bill directly into QuickBooks without first creating the purchase order.

Select Vendors, Receive Items.

Click the down arrow or begin entering a vendor name in the Vendor area of the Create Item Receipts window to select a vendor.

If an open purchase order exists for this vendor, you are prompted to receive items against a purchase order. Click Yes to see open orders.

Check the order or orders that apply to the goods you received.

Click OK.

Check the Bill Received box if a bill was received with the shipment. The form name changes to an Enter Bills form.

Verify the date on the bill.

If you haven’t transferred information from a purchase order, enter information about items received and price.

Verify the quantity of items received.

Verify the total amount due on the bill.

Click Show PO if you need to view the purchase order.

Select a save option.

Receiving a Partial Order

If you created a purchase order for the goods you received, the purchase order list displays on a screen when you indicate you have received the goods. If you didn’t receive the complete order, you should note what was received and keep the purchase order active until you receive the rest of your order.

Select Vendors, Receive Items.

Enter the vendor name in the space provided.

In the window that displays, click Yes to view open purchase orders.

Check the purchase order that applies to the goods you received.

Click OK.

Check Bill Received if a bill for the partial order was received with the shipment.

Verify the date on which the item was received.

Make any necessary adjustments to the quantities to reflect the actual items received.

Save the Create Items Receipts form.

Viewing Aging and Unpaid Bills Reports

Want to know how much you owe and to whom you owe it? Produce the Unpaid Bills report, and you’ll have access to a complete list of all outstanding amounts.

Select Reports, Vendors & Payables, A/P Aging Detail.

Scroll through the report to see which bills are due, when they are due, and how much you owe.

Select Reports, Vendors & Payables, Unpaid Bills Detail.

Scroll through the report to view amounts due to each vendor.

Press Esc to close each of the report windows.

Paying Bills

Receiving merchandise and recording bills that are due solve the problem of getting the information about your purchases into QuickBooks. The next step is to pay for your company’s expenditures. You probably have a plan in place for paying bills. Maybe you write checks weekly or twice a month. Whenever you’re ready to make payments, you’ll find the bill-paying features of QuickBooks easy to master.

Select Vendors, Pay Bills, or click the Pay Bills icon on the Home page.

Set the due date for bills you want to view, or click Show All Bills to show all outstanding bills.

Check off all bills you intend to pay.

Verify the payment amount for each bill and change the amount in the Amt. To Pay column if necessary.

Indicate the date on which checks are written in the Date field

Verify that the bank account shown in the Account field is the one upon which checks are drawn.

Click Pay Selected Bills to complete the bill payment.

Taking Discounts

When you pay your bills early, you might be entitled to take a discount offered by your vendor. Check the terms of the bill you received to see whether there is an option for a discount. Terms such as “2% 10 Net 30” provide for a 2% discount if the bill is paid within ten days. Some companies also offer a discount if the entire balance is paid in full within 30 days as opposed to financing over a longer period of time. When you enter your bill in QuickBooks, you can define the discount terms, and then you can apply the discount right in QuickBooks. The discount is calculated automatically, but you can override the calculation if necessary.

Choose Vendor, Pay Bills, or click the Pay Bills button on the Home page.

Make sure the Show All Bills option is selected.

Check off bills for payment.

Click a bill with a discount date. (There will be a date in the Disc. Date column.)

Notice that the potential discount displays in the Discount & Credit Information section of the window.

Click the Set Discount button.

The discount has been calculated. Verify that the amount is correct and make any necessary changes.

Enter the account in which the discount will be recorded.

Click Done to return to the Pay Bill window.

Complete the bill payment process.

Using the Check Register

The check register displays all the transactions that affect the cash account. There is a separate check register in QuickBooks for each cash account (and also all your other balance sheet accounts, except Retained Earnings). Every time you make a payment or record a deposit, the transaction is automatically recorded in your check register. You can view the transactions that have been recorded in the register, you can make entries directly into the register, and you can choose a transaction and go directly to the originating form.

Use the Check Register

Press Ctrl+A to open the Chart of Accounts.

Double-click your checking account to open the register.

Scroll to view existing transactions.

Double-click any transaction (except in the Date or Number fields) to view the original form and make corrections if necessary.

Click a transaction, and then click the QuickReport button to obtain a report showing all transactions for the selected payee.

Click the Sort By drop-down arrow to select from a variety of sort options.

Enter a transaction right in this register by filling in each appropriate field and then clicking the Record button.

Click the Go To option to search for a transaction in this register (not shown).

Right-click a transaction and then select Void to void the transaction (not shown).

Press Esc to close the window.

Editing Bill Payments

QuickBooks is a flexible program. If you make a mistake, you can usually go back and correct the error. Say, for example, that you wrote a check by hand to a vendor for $500 to be applied to a bill for $2,000. However, you didn’t pay attention when you recorded the payment in QuickBooks, and you recorded the entire bill as being paid. You can correct the payment amount and the unpaid portion of the bill will be reinstated.

Press Ctrl+A to open the Chart of Accounts.

Double-click the checking account you used to pay the bill. The account register displays.

Find the check that was used to pay the bill.

Double-click the check description to open the actual check.

Change the amount paid to the correct amount.

Click Recalculate to change the amount of the check.

Save the transaction.

You’ll see a warning that the change you’re making will affect the way your bill payments were previously recorded. Click Yes to accept the change.

Deleting Bill Payments

Much like the process of editing incorrect bill payments, you can also delete a payment entered erroneously. If you entered a bill payment and then realized the payment was never made, you can delete the payment, thus reinstating the bill to its unpaid status.

Press Ctrl+A to open the Chart of Accounts.

Double-click the checking account you used to pay the bill. The account register displays.

Find the check that was used to pay the bill.

Double-click the check description to open the actual check.

Change the amount paid to 0.

Save the transaction.

Click Yes when the Recording Transaction window displays.

Setting Checking Preferences

If you write checks in QuickBooks, you can set certain preferences so that the checks are created to your specifications. For example, you can control which cash account is used for certain types of checks, and you can indicate whether you want your account information to appear on your check voucher. You can have QuickBooks change the date on your checks to match the date on which they are actually printed instead of the date on which they are created. You can also require QuickBooks to warn you if duplicate check numbers are about to be used, and you can request that certain payee information be included on the check.

Select Edit, Preferences and click the Checking icon.

Click the My Preferences tab.

Indicate which bank account will be used for each type of form listed.

Click the Company Preferences tab to see the companywide options.

Select Print Account Names on Voucher to display the name of your company account on check stubs.

Leave the Change Check Date box unchecked to have QuickBooks print checks using the date on the check form. Check the box to have QuickBooks use the date on which the check is printed.

Check the Start with Payee Field on Check to force QuickBooks to position your cursor in the payee field on checks.

Checking the Warn about Duplicate Check Numbers box enables QuickBooks to provide you with a warning when you are about to issue a check with a duplicate number.

When the Autofill feature is checked, QuickBooks will fill in the account number of any vendor or customer you enter on a form.

Indicate which account is to be used for payroll and payroll tax liabilities.

If you download transactions from your financial institution directly into QuickBooks, you now have the option of choosing between the new side-by-side view and the original register view when working with online banking.

Click OK.

Writing Checks

When you pay a bill in QuickBooks, the program issues a bill payment check. Whether you actually print checks using your QuickBooks program or simply enter payments you’ve made into the program, you need to familiarize yourself with the QuickBooks check-writing feature. You might write checks for obligations that don’t have accompanying bills, such as your rent. If you write hand-written checks, they need to be entered into QuickBooks. The best way to enter these payments into your QuickBooks program is through the Write Checks feature.

Select Banking, Write Checks.

Verify the account on which this check will be written.

Enter the payee’s name.

Enter the check amount.

Verify the date and check number, if applicable.

Enter the account to which this check should be charged, the amount, and an optional memo.

If you are purchasing inventory, click the Items tab. Enter the items, the quantity, and the cost.

Indicate whether this is to be an online payment.

Check the To Be Printed box if this check is to be placed in the print queue.

Record the check by selecting a save option.

Printing Checks

When you write checks in QuickBooks, you indicate whether you want to print the check immediately (by selecting the Print option at the top of the window), print it at some future date (by checking the To Be Printed box), or not print it at all (by saving and closing). When you choose to print checks later, you can choose to print an entire batch of outstanding checks, or you can pick the ones you want to print and save the others until later.

Select File, Print Forms, Checks.

Verify the bank account.

Verify the first check number for this batch of checks.

Check off all checks that are to be printed.

Click OK.

Verify the printer settings.

Select the check style that matches your actual checks.

Enter the number of copies that you want to print.

Check the Collate box if you want your printed checks collated.

Indicate whether you want to have QuickBooks print your company name, address logo, or signature image on the checks. If your checks are preprinted with this information, you should leave these boxes blank.

Click Print to send the checks to the printer.

Voiding Checks

You can void checks that have been recorded in your QuickBooks company file. There are two methods of voiding, depending on when the check was issued. If the check was issued in the current year, you can void the check in the check register. If the check was written in a prior year, you should be careful not to change amounts that appeared on your financial statements. The steps shown here will prevent that from happening.

Void a Check in the Current Year

Press Ctrl+A to open the Chart of Accounts.

Double-click the name of your checking account to open the register.

Click the Go To button.

Select whether to search by payee, check number, or some other criteria.

Enter the name (if you’re searching by payee), check number, or other information to help you find the check you want to void.

Click Back or Next to search backward or forward in the register. Continue clicking Back or Next until you find the check you’re looking for.

When the entry for the check displays in the register, press Esc to close the Go To window.

Right-click the register entry.

Click Void [check type] -Check on the pop-up menu (where [check type] represents the type of check you are deleting—in this example, it’s a bill payment). The check amount switches to 0 and VOID displays in the memo area.

Click the Record button.

Void a Check from a Previous Year

Select Company, Make General Journal Entries.

Enter today’s date (or the date on which the check became void).

Enter the name of the cash account on which the check to be voided was drawn.

Enter the amount of the check in the Debit column.

Enter the phrase Void Check [check number] in the Memo column and enter the number of the check you are voiding.

Enter the name of the account to which the check was originally charged.

Verify the amount that displays in the Credit column.

Click Save & Close to save the transaction and close the window.

Follow Steps 1–7 from the previous task to open the register and find the check you want to void.

Do not change the amount of the check! In the memo field, type Voided [on date] and enter the date on which you created the journal entry.

Click the Record button.

Because this change affects a prior year, you might be required to enter a password before the transaction can be recorded.

Click Yes to indicate that you understand this change could affect previous financial statements.