Do your suppliers (vendors) give you discounts (credits) on your unpaid bills? How do you handle that in QuickBooks? This is video 25 ? (Vendor Discounts) of QuickBooks Online Complex Issues And Advanced Technique at Udemy.com.

There are two types of supplier discounts.

1. Good Customer Discounts
2. Early Pay Discounts

When vendors decrease what you owe them for a past service or product that was purchased, they may give you a document called a supplier credit memo, or a vendor credit memo. When we get a bill, our accounts payable (A/P) goes up and our Expenses go up (unless it’s a long-term asset that we purchased). When we enter a credit, it’s the opposite. The A/P goes down and the Expenses go down.

In QuickBooks we usually apply the credit to a specific bill, and you can apply the credit at the moment that you pay the rest of the bill. That’s the normal way to apply the credit. In QuickBooks we go to + New and down to Supplier Credit (in the Suppliers column). Use the same expense category as you used on the original bill. Also, in the Description enter something like “credit for bill # 8282”. You may also want to type that in the Memo box below on the left. There is no need to make the amount negative. Enter a positive number for the amount. You could enter the reference number if you had one from the supplier. Save and close.

Check your reports. In the Trial Balance you should see that the Accounts Payable decreased by the amount of the credit. In the Unpaid Bills Report you should see that each supplier is listed. You will see all of the unpaid bills for that supplier as well as any credits that have not yet been applied to any bill. At this point in time we should see our credit because it has not yet been applied to any bill.

Also, in the Trial Balance, click Repair Expense to see the transactions for Repair Expense. At the bottom you will see that this account has been decreased by the amount of the credit.

When we actually go ahead and pay the bill in question to our supplier we will apply the credit we just entered. To pay a bill we go to + New, Pay bills. First you can filter for the Payee (supplier or vendor) in question. Set the Payment date. When we click inside the Credit Applied box that is beside the bill that we want to apply the credit to, a small message appears denoting the amount available, as you can see below. In this case it is $300.

If we decide to apply all of the $300 and enter 300 and press Tab, QuickBooks assumes that we are going to pay the bill off, leaving nothing left to pay on that particular bill. If we agree, we can click Save.

Now we can take a look at the Unpaid Bills report.

Multiple Credits

if there’s more than one vendor credit available for that particular vendor, QuickBooks online only shows the total available credit in the pay bills window. If it’s less than the total credits that are used in one particular bill payment, then a proportional amount will be applied from each available credit.

Suppose we get two credits from our supplier and we enter them. Our Unpaid Bills report will show two rows of data for those two credit, because we haven’t applied them yet.

At the moment you try to apply credit from several vendor credits, the pay bills window will first show you the total money amount of all open Unapplied credits combined. That’s the first thing it’s going to show you the amount of the credit you apply. Then will be deducted from the currently unapplied credits in a specific ratio.

Suppose you want to apply some amount of the total credits available to a specific bill. You are not yet paying that bill. You are just applying credits. You want to apply only $200 worth of credits, where there are $600 total credit available. That’s 33.3%. So one third of the value of the credit will be deducted from the original total value of each available credit. How do we do this? Click + New, Pay bills. Enter the date you are applying the credit. Filter by the supplier (vendor). Enter the amount in the Credit Applied box in the row of the bill that you want to reduce. Since QuickBooks assumes that we are paying, and we aren’t paying in this case, we need to change the amount in the Payment column to zero.

It Might Not Work That Way

I will need to investigate further, but QuickBooks may have changed.

Here is our other new account in the chart of accounts.