Set Up Accounts Payable in QuickBooks

Accounts Payable is a crucial aspect of any business that helps maintain a detailed record of all outstanding bills owed to vendors for goods and services purchased on credit. Accurate recording of Accounts Payable is essential to avoid financial miscalculations, incorrect tax payments, and consequent tax fines. QuickBooks Desktop software provides an efficient way to maintain Accounts Payable records. Here's how you can set up and manage Accounts Payable in QuickBooks:

Workflow 1: Create Purchase Orders -> Retrieve Stock -> Enter Bills -> Make Bill Payments

This workflow is ideal for businesses that require a structured process for managing their purchases and payments. Follow these steps:

1. Create Purchase Order

• Go to the menu bar and locate the Vendors tab, then select Create Purchase Orders.
• From the Vendors dropdown menu, select an existing vendor or create a new vendor form based on the vendor's history with the business.
• Fill in the line item area by entering the items you're ordering.
• Click on the Save & Close tabs.

2. Receive Inventory

a. Receive Inventory with Bill

• From the Home screen, select the Receive Inventory drop-down and then choose Receive Inventory with a bill.
• On the Enter Bills window that appears:
  • Choose the vendor name from the dropdown.
  • Select Yes when prompted with the "Open POs Exist" dialogue box.
  • In the Open Purchase Orders screen, click the correct Purchase Order option followed by the OK tab.
  • Review the information on the Bill. Note that except for the Memo field, any fields that were filled in on the PO are carried over to the Bill.
  • Click on the Save & Close tabs.
  • Proceed to the last step to pay the bills.

b. Receive Inventory without Bill

• From the Home screen, select the Receive Inventory drop-down and then choose Receive Inventory without a bill.
• On the Item receipt window:
  • Choose the vendor name from the dropdown.
  • Select Yes when prompted with the "Open POs Exist" dialogue box.
  • In the Open Purchase Orders screen, click the correct Purchase Order option followed by the OK tab.
  • Review the information on the Item Receipt. Note that except for the Memo field, any fields that were filled in on the PO are carried over to the Item Receipt.
  • Click on the Save & Close tabs.
  • Proceed to the next step to enter a bill against the stock items.

3. Enter Bills against Stock Items

• From the main screen, select Enter Bills against Inventory.
• In the Select Item Receipt window:
  • From the Vendor dropdown menu, click on the appropriate vendor name.
  • Check the box next to "Use item receipt data for the bill date" to ensure the original date is used.
  • Select the Item Receipt that corresponds with the bill.
  • Click Ok. QuickBooks automatically converts the item receipt into a bill.

4. Bill Payment

• Locate the Vendors tab from the menu bar and select Pay Bills.
• Select the appropriate Accounts Payable Account based on the vendor's details.
• Click on the bills you wish to pay.
• Set any discount or credit that you want to apply to the bills.
• Click on the appropriate payment date and type:
  • Check
  • Credit card
  • Cash, debit card, ATM card, PayPal (US only), or EFT (US only)
  • Direct Deposit (US only)
  • Online Bank Payment (US only)
• Select Pay Selected Bills.
• In the Payment summary screen, select Done once you have finished paying the bills. Click on Pay More Bills to return to the Pay Bills screen.

Workflow 2: Bill -> Payment

This process is suitable for businesses that don't require creating purchase orders and only need to enter bills and make payments. Follow these steps:

1. Enter Bills

• On the Home screen, click Enter Bills.
• Click on the selected vendor.
• Click on the correct date.
• Select the appropriate option:
  • Expense
  • Items
• Select either the expense account or the item one.
• Enter the required amount.
• If you are tracking billable expenses, select the customer job option and click on the checkbox next to the "Billable" field.
• Click on the Save and Close tab.

2. Payment of Bills

• Locate the Vendors tab from the menu bar and select Pay Bills.
• Select the appropriate Accounts Payable Account based on the vendor's details.
• Click on the bills you wish to pay.
• Set any discount or credit that you want to apply to the bills.
• Click on the appropriate payment date and type:
  • Check
  • Credit card
  • Cash, debit card, ATM card, PayPal (US only), or EFT (US only)
  • Direct Deposit (US only)
  • Online Bank Payment (US only)
• Select Pay Selected Bills.
• In the Payment summary screen, select Done once you have finished paying the bills. Click on Pay More Bills to return to the Pay Bills screen.

By following these steps, you can easily add and set up the Accounts Payable record with the required details in QuickBooks Desktop without any hassle, ensuring timely and accurate payments.

FAQ

Q: What is Accounts Payable in QuickBooks?

A: Accounts Payable in QuickBooks is a feature that helps businesses maintain a detailed record of all outstanding bills owed to vendors for goods and services purchased on credit.

Q: Why is it important to maintain accurate Accounts Payable records?

A: Accurate recording of Accounts Payable is crucial to avoid financial miscalculations, incorrect tax payments, and consequent tax fines. It ensures that the business has a clear understanding of its financial obligations and can make timely payments to vendors.

Q: What are the two main workflows for managing Accounts Payable in QuickBooks?

A: The two main workflows for managing Accounts Payable in QuickBooks are:

1. Create Purchase Orders -> Retrieve Stock -> Enter Bills -> Make Bill Payments
2. Bill -> Payment

Q: When should I use the first workflow (Create Purchase Orders -> Retrieve Stock -> Enter Bills -> Make Bill Payments)?

A: The first workflow is ideal for businesses that require a structured process for managing their purchases and payments. It allows for better tracking of ordered items, received inventory, and payment of bills.

Q: When should I use the second workflow (Bill -> Payment)?

A: The second workflow is suitable for businesses that don't require creating purchase orders and only need to enter bills and make payments. This process is more straightforward and is often used by smaller businesses or those with simpler purchasing processes.