Pay Expenses and Enter Bills in Quickbooks

Although most small business owners sift through the daily mail looking for envelopes containing checks, they usually find more containing bills. One frustrating aspect of running a business is that you often have to pay for the items you sell before you can invoice your customers for the goods. If you want your financial records to be right, you have to tell QuickBooks about the expenses you’ve

incurred. And, if you want your vendors to leave you alone, you have to pay the bills they send.

But paying for expenses can take several forms. QuickBooks is up to the challenge and, aside from a few idiosyncrasies that drive accountants nuts, it succeeds. This chapter explains your choices for paying bills (now or later) and describes how to enter bills and record your bill payments. If you pay bills right away, you’ll learn how to write checks, use a debit or credit card, and pay with cash in QuickBooks, among other options.

If you enter bills in QuickBooks for payment later, you’ll learn how to handle the easy ones, such as rent, as well as reimbursable expenses and inventory. QuickBooks is happy to help you through every step of the process: entering bills you receive if you want to pay later, setting up bill payments, and even printing checks you can mail to vendors. But for modest enterprises with few expenses, writing checks by hand and entering them in the program works just as well.

When to Pay Expenses

 When it comes to handling expenses, QuickBooks gives you a choice—pay now or pay later. (You can choose to not pay bills, but QuickBooks can’t help you with agencies or represent your company in bankruptcy court.) If bills arrive about as often as shooting stars, go ahead and pay each one immediately, and you’ll be sure your bills are paid on time.

In QuickBooks, paying immediately means writing a check, entering a debit card or ATM transaction, entering a credit card charge, making an online payment, or using money from petty cash—all of which are described in this chapter. But when bills arrive as steadily as coffee orders at the local Starbucks, you’ll probably want to set aside time to pay bills all at once when it won’t interfere with delivering services or selling products. What’s more, most companies don’t pay bills until just before they’re due—unless there’s a good reason. Setting up vendor bills for later payment is known as using accounts payable because you store your unpaid expenses in an Accounts Payable account.

In QuickBooks, entering bills for later payment delivers all the advantages of convenience and good cash management. You can tell the program when you want to pay bills—for instance, to take advantage of an early payment discount or the grace period that a vendor allows. Then, you can go about your business without distraction, knowing that QuickBooks will let you know when bills are on deck for payment.

.Once you decide whether you’re going to pay bills now or later, use that method consistently. Otherwise, you could pay for something twice by entering a bill in Quick- Books and then, a few days later, writing a paper check for the same expense. To prevent duplicate payments, always enter bills you receive in the mail (or email) as bills in QuickBooks and pay them using the Pay Bills command. In QuickBooks 2011, the Enter Bills window includes a list of recent transactions, shown in Figure 9-1, which you can use to look for payments you’ve already made.

Note: You can still charge expenses to your credit card and write checks by hand to pay for something immediately or when you’re out of the office, and enter those transactions in QuickBooks without entering a corresponding bill.

Entering Bills

At first glance, entering bills in QuickBooks and then paying them later might seem like more work than just writing a check. But as you’ll learn in this chapter, after you enter bills in QuickBooks, the program makes it incredibly easy to pay them.   

To enter bills in QuickBooks, open the Enter Bills window using any of the following methods:

• On the Home page, click the Enter Bills icon (it’s in the Vendors panel).

• Choose Vendors➝Enter Bills.

• In the Vendor Center icon bar, click New Transactions➝Enter Bills.

The fields on a vendor’s bill are similar to the ones you see on the invoices you create. In fact, if your vendors use QuickBooks, the bills you receive are just another company’s QuickBooks invoices (see Chapter 10) or statements (see Chapter 11).

With the Enter Bills window open, here’s how to enter a bill in QuickBooks:

1. In the Vendor drop-down list, choose the vendor who billed you. QuickBooks automatically chooses the Bill option so that you can record a vendor bill. (You’ll learn about recording a credit from a vendor on. The program also turns on the Bill Received checkbox because you rarely enter a bill you haven’t received. Turn off this checkbox only if you receive a shipment of inventory without a bill. If you set up any pre-fill accounts in the vendor’s record, Quick- Books automatically adds those accounts to the table on the Expenses tab near the bottom of the Enter Bills window.

2. In the Date box, type or select the date you received the bill.

If you set up payment terms in the vendor’s record, QuickBooks figures out when the bill is due and fills in the Bill Due field, as you can see in Figure 9-1. For example, if the bill date is 8/12/2010 and the vendor’s payment terms are Net 30, the bill is due 30 days (one month) after the bill date, which is 9/11/2010.

If QuickBooks fills in a date that doesn’t match the due date on the bill you received, in the Bill Due field, enter the date printed on the vendor’s bill—it’s the one you want to go by.

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3. In the Ref. No. box, type the vendor’s invoice number, statement date, or other identifying feature of the bill you’re paying. The Ref. No. box accepts any alphanumeric character, not just numbers, so you can type in things like “1242,” “Invoice 1242,” and “Statement 1/6/2011.” If you want to include additional notes about the bill, type them in the Memo box.  

 Figure 9-1:╇ The Terms field shows the payment terms from the vendor’s record. If you haven’t assigned payment terms to a vendor, you can do so right in the Enter Bills window. In the Terms drop-down list, choose the terms that the vendor requires. When you save the bill, QuickBooks asks if you want the new terms to appear the next time. The program is asking if you want to save the terms to the vendor’s record; click Yes.

 4. In the Amount Due box, type the total from the bill. The only time you’d change the amount is when you take a discount that the vendor forgot to apply or deduct a portion of the bill because the goods were defective. In the lower half of the Enter bills window, QuickBooks initially displays the Expenses tab, which is where you enter information about expenses such as utility bills, office supply bills, and your attorney’s fees. If you assign only one pre-fill account to the vendor, QuickBooks automatically fills in the first cell in the Amount column with the Amount Due value.

5. In the first cell of the Expenses tab’s Account column, choose the expense account from your chart of accounts that corresponds to the first expense on the bill. When you click a cell in the Account column, a down arrow appears. Clicking the arrow displays a drop-down list of every account in your chart of accounts, but QuickBooks automatically highlights the first expense account in the list. To choose a different expense account—the account for your legal fees, say—scroll in the drop-down list and select the account you want.   chapter 9: paying for expenses 203 ╉╉╉Entering Bills FREQUENTLY ASKED QUESTION Figure 9-2:╇ You can’t change a vendor’s currency after you’ve recorded your first transaction for that vendor. To switch to a different currency, you have to create a new vendor record using the new currency. The alternative is to calculate the bill’s values in your home currency based on the going exchange rate and enter the bill in QuickBooks with those converted values.

6. If the bill covers several types of expenses (such as airfare and your travel agent’s fees), in the first Amount cell, type the amount that belongs to the expense account in the first row. If you assign more than one pre-fill account to a vendor, QuickBooks doesn’t make any assumptions about how the amount due should be divided; you have to type the amounts in each row’s Amount cell.

7. If an expense relates to a job, in the Customer:Job column, choose the customer or job. If you fill in the Customer:Job cell, QuickBooks puts a checkmark in the “Billable?” column. If you don’t want to charge the customer for the expense, click the checkmark to turn it off.

8. If you’re tracking classes, choose the appropriate class for the expense. The Class column appears only if you’re using QuickBooks’ classes.

9. If the bill you’re entering includes different types of expenses, repeat steps 5 through 8 to add a row for each type of expense, as shown in Figure 9-3. As soon as you finish one row in the table, QuickBooks fills in the Amount cell in the next row with the amount that’s still unallocated. For the first through the next-to-last line, you have to edit the amount that the program fills in to match your expense. The amount QuickBooks enters in the last line should be correct if you haven’t made any typos. If the multiple accounts and amounts are hopelessly mangled, click the Clear Splits button to clear the table so you can start over.

10. Click Save & Close to save the bill and close the window. Or, if you have other bills to enter, click Save & New to save the bill and then display a blank bill.   â•‰â•‰â•‰Automating Recurring Bills Figure 9-3:╇ If you change the value in the Amount Due box, QuickBooks doesn’t automatically adjust the values on the Expenses and Items tabs to match. Click Recalculate to automatically modify the last entry amount so that the Amount Due and the total on the tabs are the same. If you change a value in one or more Amount cells, click Recalculate to update the Amount Due.