Comments on: Paying a Bill Before Receiving Inventory in QuickBooks

By: Pat

Pat — Wed, 14 Dec 2011 15:40:34 +0000

I think I found another way of doing it. To avoid all the entries, what I do is make a payment to the vendor via the checkbook (I usuallt wire funds) and choose the Advanced Inventory asset account. When the product is received, I create the bill from the PO. I then make a credit for the Advanced Inventory payment and pay the bill with the credits. This makes it easy for me without having to worry about all the items on the bill. So far, so good. Technically, if you are paying for inventory without receiving it, you are creating a credit anyways with that vendor. We normally pay 30% deposit, then 70% when items are shipped. Tell me what you think…

By: Charlie

Charlie — Mon, 17 Oct 2011 21:27:40 +0000

It is a complicated process, because QuickBooks generally treats the receipt and bill as one transaction.

Note, however, that with the release of QuickBooks Enterprise V12 there is an “enhanced inventory receiving” option that lets you separate the bill from the receipt. See my article on this at http://www.sleeter.com/blog/2011/09/quickbooks-2012-enhanced-inventory-receiving/

And that is only available if you move to Enterprise, in the 2012 release. THERE ARE RISKS if you convert an EXISTING file to use this feature – look at the cautions in that article.

By: anne

anne — Mon, 17 Oct 2011 21:04:52 +0000

To be honest, this is extremely time comsuming. It is a good idea for several transaction. However, like my company, we prepay about 300 transaction each month and receiving is handled by receiving department. It is very hard for them to located the existing Bill to perform the second step. I am still looking for the better solution to solve it.

By: Jean

Jean — Tue, 12 Oct 2010 14:01:08 +0000

Kathleen,
Thank you very much. We will give it a try.

By: Kathleen

Kathleen — Sun, 10 Oct 2010 15:24:30 +0000

Jean
I do this every day. Here is how I accomplish it.
I’ve setup an account called “Deposit on Inventory” the account is an “other Asset” account.

January:
Pay the 1/4th deposit to vendor in this example it is $2500 of the $10,000 total. Use the deposit on inventory account on the expenses tab. It will then post a debit to other assets and a credit to AP.

March:

Since the payment date and the item receipt can be done on different days, these are different transactions.
First:
Pay the additional deposit of 1/4th. Post to deposit to the deposit on inventory account.

2nd
Receive the 1/4th of the goods.
On the bill receive in the goods. On the expenses enter a credit to the deposit on inventory for the exact amount of the items received (not what you paid they may be different). If you did not receive all the items, no worries, just offset the bill so it equals zero.

Repeat the process until all items are received in and the original deposit has been depleted.

Now here is the MOST IMPORTANT STEP. Go to the Deposit on Inventory account and reconcile it to ZERO. What does that mean? You open the register and right click reconcile. Put an ending balance of zero in. Check off all the deposits that have been FULLY used. Do not check off any that are still out there waiting for items to come in. What does this accomplish? You know in the register what makes up the value in the account and this insures you do not under or overapply the intial deposit. I create a quick report on that account, filter to UNCLEARED items and I have a great report of what is outstanding in the Deposit on Inventory account. I have done this for 3 years at a client and it works beautifully.

I also keep the original copy of the po and log the “offsets” when I credit this account as a double check. All the offsets must equal the total deposits paid on the PO.
Hope that helps and thanks to Charlie to opening up these discussions and blogs!

By: Jean

Jean — Sun, 10 Oct 2010 13:40:34 +0000

What is the best way to handle our situation? I have outlined an example. The entire process for one purchase order can be 5-6 months.

January – create purchase order and pay 1/4 of payment toward purchase order.

March – Received inventory. Most cases all inventory is received but what do you do if all of it was not received?

April – 1/4 payment toward purchase order

May – 1/4 payment toward purchase order

June – Final 1/4 payment toward puchase order

Thank you.

By: Charlie

Charlie — Fri, 03 Sep 2010 04:33:59 +0000

Brad, I would do something very different there, too complicated to describe in a comment like this. That is a prepaid income or “retainer” kind of situation

By: Brad

Brad — Thu, 02 Sep 2010 23:09:09 +0000

This may work perfectly for what we do as well. Can you tell me if this can be applied to when a patient buys a series of treatments, pays for them in advance and comes in every month to get them.

By: Charlie

Charlie — Tue, 06 Jul 2010 17:46:17 +0000

Aleksandra: I haven’t actually played with that directly – it SHOULD work the same way in the Credit Card window as it does in the Pay Bills window. My recommendation is to make a backup copy of the file and then test it. The only possibly interference would be to your credit card reconciliation, but since you aren’t changing the amounts, that should not have an effect. But I haven’t tested that at this moment.

By: Aleksandra

Aleksandra — Sun, 04 Jul 2010 09:26:32 +0000

Charlie,

Thank you for the tip. I plan to use it, since I purchase most of my inventory on ebay and pay for it using Paypal/credit card. If I do follow your instructions, how would I record the payment if I pay for the inventory using a credit card and the inventory is yet not received?