Now that we’ve set up QuickBooks® Online and explored Accounts Receivable, it’s time to turn our attention to Accounts Payable or A/P. This is the company’s Expenses and Liabilities, the money it owes, sometimes called 'money-out'. The more detail you track about costs, the more insight you gain about the workings of your business.
Job costing, mileage, meals — these all have different reporting needs for financial accuracy and workflow efficiency. By utilizing all of QBO’s features, the business can run reports to track the course of resources from order to allocation.
In today's article let’s take a look at some of the features related to Vendors and how to implement Accounts Payable.
Setting-up Expenses Preferences
We are going to be looking at setting-up the preferences for 'Billing and Expenses' and also for 'Purchase Orders'. Both of these will help you maximize tracking of your Accounts Payable.
Billing and Expenses
To turn on Bills and expenses: Click the Gear > Account and Settings > Expenses > Bills and expenses.
The Account & Settings Window, Expenses tab in QuickBooks Online.
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1) Show Items table on expenses and purchase forms. Be certain to turn on this option that allows you to post items. When products are bought for resale, Expense forms have two grids, the top for overhead accounts like Shipping, and the lower to purchase the Items themselves.
- PEBCAK! Note that sometimes the Items table is collapsed, so you don’t even notice it. Click the triangle to the left and it will appear.
2) Track expenses and items by customer. It's also important to turn this option on so that you can perform Job Costing and track profitability.
If you want to see not just how much income you received from a Customer, but also how much you spent providing their services, this allows you to assign a Customer to every Expense. That way you can monitor your Net Profit, not just your total income, customer by customer.
When you create any Bill, Expense, or Check, be certain to assign the Customer’s name on the right.
3) Make expenses and items billable. Another key setting to turn on, this one is used when you want to pass on a reimbursable charge to Customers for a product you purchased, a subcontractor, or time you put into their job. This option causes those expenses to appear as itemized lines on Invoices.
You can set a default rate for Markup.
You can also track that reimbursement as Income if you wish.
It’s optional to charge sales tax for that reimbursed expense. If you paid tax on the purchase, you should pass that tax on to your Customer.
To use this feature, any time you create a Bill, Expense, or Check and assign a Customer’s name, also check off the Billable box. Later, be sure to add the expense to the customer’s next Invoice!
4) Default bill payment terms. Use this setting if you track a bill you owe. Are most of them Due on Receipt, or after a certain number of days? Net 15 and Net 30 are two of the most common.
Purchase Orders
To turn on Purchase Orders: Click Gear > Account and Settings > Expenses > Purchase orders.
Purchase Orders allow you to order products from a Vendor, have them sent to you, then pay later. This allows you to track Inventory you have on order.
Lesson Wrap-up
Taking the time to turn on the proper Expense settings from the outset is crucial to your cost tracking in QuickBooks Online®. QBO can be a simple expense register, but by turning on the features we have covered here, any expense can be assigned to Customers for Job Costing, and passed on to the Customer’s next invoice for reimbursement. These workflow techniques turn QuickBooks Online® into a true cost management tool.
Even though it's awhile off yet, I will be instructing a free webinar for Insightful Accountant on Vendor transactions. That webinar will be on August 12th. You can sign-up here.
If you are wanting some additional training in QuickBooks Online® then check out what I have available at Royalwise Solutions.
And coming up soon, Insightful Accountant and I have a co-sponsored webinar titled, QuickBooks® Online Banking on April 22 at 12:00 p.m. Eastern for which you can Register Here.
Next week's article looks at the QuickBooks® Online Vendor Center, adding Vendors, and more.