Accounts Payable

Understanding Accounts Payable and Accounts Receivable

Accounts Receivable (A/R) and Accounts Payable (A/P) are the core of your cash flow. It is important to understand the difference between them and how to manage them correctly in QuickBooks Online.

What are Accounts Receivable and Accounts Payable?

• Accounts Receivable (A/R): This represents money owed to your business by your customers. When you create an invoice, the amount is added to A/R until the customer pays you.
• Accounts Payable (A/P): This represents money your business owes to vendors or suppliers. When you enter a bill, the amount is added to A/P until you pay the bill.

Best practices for entering transactions

To keep your books accurate, you should use specific transaction types rather than Journal Entries.

• Do not use Journal Entries: You generally cannot use a single Journal Entry to affect both A/R and A/P accounts. Instead, use the standard forms designed for these workflows.
• For A/R: Create Invoices to record sales and Receive Payments to record money coming in.
• For A/P: Create Bills to record expenses and Pay Bills to record money going out.

How to pay bills correctly

A common issue arises when users try to pay a bill by writing a check directly without linking it properly. This can leave the bill marked as unpaid even though money left your bank account.

To pay a bill in QuickBooks Online:

1. Enter the bill first using the + New button and selecting Bill.
2. Go to the + New button again and select Pay Bills.
3. Select the bill(s) you want to pay and the payment method (Check, Credit Card, etc.).
4. Save the payment.

Note: If you write a check using the Check expense form, it does not automatically link to an open bill. If you have already written a check but still see the bill in the Pay Bills window, you should delete the check and go through the Pay Bills workflow instead.

Handling vendor credits and overpayments

Sometimes you may end up with a negative balance for a vendor (a credit). This often happens if you deleted a bill after issuing a payment, or if you overpaid a vendor.

• What it means: A negative balance in A/P is essentially a credit the vendor owes you. It remains as a credit until they refund you or you apply it to a future bill.
• How to fix it: You do not need to delete the payment. The credit will sit in the vendor’s profile until you receive a refund or apply it to the next bill you receive from them.

Fixing payment errors

If you have made a partial payment or entered the wrong amount, you can correct it as long as the payment has not cleared.

1. Go to Settings (the gear icon) and select Chart of Accounts.
2. Locate the bank account used for the payment and view the register.
3. Find the payment transaction and select it to edit.
4. Adjust the amount to match the bill exactly.
5. Save the changes.

Customizing your Chart of Accounts

If you need to change the account number or details for your Accounts Payable account:

1. Go to Settings and select Chart of Accounts.
2. Find the Accounts Payable account in the list.
3. Select the View register (or edit) action, then choose Edit from the dropdown (or click the arrow next to the account name and select Edit).
4. Update the Account Number or Name as needed.
5. Select Save and Close.