A function in QuickBooks I often see overlooked or completely misused is the Enter Bills and the subsequent Pay Bills function in QuickBooks. Both are great functions that give an overview of what the company's total liabilities are to vendors, when they're due, and the ability to print or even pay them online through QuickBooks.
In this two part post we'll discuss the process of entering bills and then we'll dicuss how to properly pay the bill.
The flip side to this is that it is time-consuming and the same basic function (paying a bill) can be achieved by just entering a check into QuickBooks when payment is remitted. Most small business that I deal with actually does this very thing.
To them, it's not worth the time and effort to enter the same costs they know and understand each month. They set up an ACH with most vendors and will enter the expense into QuickBooks when it hits the bank. This can even be further automated by using a memorized transaction for fixed costs every month.
However, if you're a restaurant, the number of vendors can be overwhelming. Each has its own time frame (Due on receipt, Net-30, etc.) when the payment is overdue, they send multiple bills over the course of the month with varying amounts, and remit monthly statements with an overview of all the bills sent for that particular month.
Don't freak out though, QuickBooks helps handle this process in a smooth manner.
The accounting behind entering and paying a bill is as follows:
Each vendor must be entered with the name, address, account number, etc. However, if you prefer, this information can be entered when you key in the bill. The steps to enter bills in QBO are:
Note: Quickbooks Online uses a handy warning message if you type in the same invoice number for a client to avoid duplicate payments. If this happens, hover your cursor over the left menu bar where it says 'Expenditures' and choose 'Vendors'. Locate the vendor and click on the name to see a list of all the bills entered.
Entering bills is cumbersome if you have a large number of invoices. It is, however, an excellent way to make sure everything is paid on time, that you have an accurate reading of your accounts payable, and assist with cash flow and forecasting.
Refer to your CPA for the threshold that they would like to see an expense become an asset.
If a vendor is sending multiple bills or has the potential to send multiple bills over the entire month a statement is generated on a monthly basis requesting payment to be remitted for the referenced bills currently due. I never use the statement as a means of remitting payment.
If I've been doing my job right I will have all of the bills in QuickBooks referenced to the statement. I use the statement then as a means of reconciling my outstanding bills.
I first head into the vendor center, select the vendor, then review the bills referenced in the statement. If you've been entering each bill in with all of the pertinent information you can sort by then date then follow along with the invoice numbers.
I double-check all of the invoices as credits can be issued that are overlooked, an amount can be entered wrong ($654.63 vs. $645.63), and you may have just lost a bill. This helps you manage your vendors and keeps your head cool.
Entering bills can be time-consuming and as discussed before might not need to be in your company's deck of cards.
If however you're receiving multiples bills from a plethora of vendors entering bills into QuickBooks helps keep your accounts payable in check, holds your vendors accountable for credits issued, and gives you a big picture of your total liabilities to your vendors at any one given time to help forecast your cash flow.