Mastering bill payments in QuickBooks: A step-by-step guide

Last month, we discussed how helpful it is to record and pay bills in QuickBooks Desktop. Using the software’s tools will ensure that you always have a record of bills and their payments. We also reviewed the steps required to enter bills in QuickBooks (Vendors | Enter Bills), which you must do before paying them. We then talked about the importance of creating Reminders for your bill due dates (Edit | Preferences | Reminders | Company Preferences) and having those Reminders appear when you first start a work session in QuickBooks (Edit | Preferences | Reminders| My Preferences). See all of the information here.

This month, we show you how to pay the bills you’ve entered. Assuming you’ve entered some, click the Pay Bills icon on the homepage or go to Vendors | Pay Bills. QuickBooks defaults to Show all bills, but you can only display bills Due on or before [date]. You can also have QuickBooks show all vendors or select a specific one, and you can choose a field to sort by (Due Date, Vendor, Amount Due, etc.). Here's what this window looks like:

You can choose which bills you want QuickBooks to record.

Click in the box in front of each bill you want to pay or click Select All Bills. QuickBooks will change the amount in the Amt. To Pay column to match the Amt. Due. If you can only make a partial payment, just edit the Amt. To Pay field. You’ll also see the total being paid for all of the bills in the lower right corner. 

If you have discounts or credits that are slated to be applied to the bill payment, they’ll show up in separate columns in this table. But if a vendor told you after they sent you the bill that you’re entitled to a discount, you can add it at the bottom of this window. Highlight the vendor in the list and click Go to Bill if you just want to see it again. To add a discount before you pay the bill, click Set Discount to open the Discount and Credits window, and complete the fields there, then click Done. You should see your discount reflected in the table.

Tip: You can ask QuickBooks to always automatically apply discounts and credits so you don’t have to keep track of them. Go to Edit | Preferences | Bills | Company Preferences and check the boxes.

You can add a discount even if you’ve already entered a bill.

At the bottom of the Pay Bills window, check to make sure the date that you want to appear on the payments is correct. Select Check as the Method. Select Assign check number if you plan to write the check manually. Otherwise, choose To be printed and make sure the Account is correct. Click Pay Selected Bills.

The Payment Summary window will open. From there, you can print checks and print or email bill payment stubs, and pay more bills if you want. Click Done if you’re ready to move on. You can print checks later by opening the File menu and selecting Print Forms, then Bill Payment Stubs or Checks.

Warning: Don’t use Banking | Write Checks to pay bills. The two transactions won’t be linked and your bookkeeping will not be accurate. 

Other Payment Options

There are other payment options for paying bills. You can pay bills directly from QuickBooks with your bank account, debit card, or credit card. Vendors receive their payment by ACH or check. This gets complicated, as some of them involve additional setup and fees. We recommend you set up a session with us if you’d like to explore this option and see how it works.

Tip: You should add any payment methods that aren’t already set up in QuickBooks if you’re going to use them. Open the Lists menu and click Customer & Vendor Profile Lists | Payment Method List. Open the Payment Method menu and select New to enter a new method.

You can enter a new Payment Method in QuickBooks.

Tracking Your Bills

There’s more than one way to see what bills must be paid. We have already gone over using the Pay Bills window. QuickBooks’ Bill Tracker tool is the best way to get a quick overview. Click Bill Tracker in the toolbar. The software displays the status of four stages in the bill pay process: unbilled (like purchase orders), unpaid (open), unpaid (overdue), and paid in the last 30 days.

QuickBooks uses colored bars to help you distinguish between them. Each bar shows the number of transactions and the total dollar amount for the bills in that category. Click on any of the bars to isolate those transactions in the table below. The Action column at the end of each row shows your options (like converting a purchase order to a bill).

We hope you’ll use QuickBooks’ bill-paying and tracking capabilities. Keeping your accounts payable current will lead to better vendor relationships and a cleaner, more accurate set of books. As always, we’re here to answer any questions you might have.

6 ways QuickBooks Online helps manage your payables

Your company’s Accounts Payable obligations have a lot of moving parts. You have bills to pay, expenses to record, inventory items and other purchases to make (some of which require purchase orders), vendor credits to process, 1099 contractors to pay, checks to write, and an accurate database of vendors to maintain. 

QuickBooks Online has built-in tools that support all of these obligations. Just like it helps you manage your receivables by supporting customer records, invoices and estimates, sales receipts, payments, credit memos, and customer records, so, too, it allows you to document and process forms and transactions for the individuals and companies that are owed money from you.

If you keep both your receivables and payables current and you’re making more money than you’re spending, your cash flow should reflect that necessary balance. We’re going to focus on the payable elements of the equation in this column.

Managing Individuals and Companies

NOTE: Intuit is slowly introducing a new navigation toolbar. That’s a welcome change, since the existing one is confusing. We still have the old toolbar, so our step-by-step instructions in this column will be based on that one. If you have the new one, please bear with us.

There’s nothing difficult about creating records for your vendors and contractors. Click New in the upper left corner, and the Add vendor under Vendors. Complete the fields in the vertical pane that slides out from then right. Most of it is standard contact information, but there are some fields that require more attention. If you make ACH payments to the vendor, complete those fields. You may also need to supply:

• Business ID Number or Social Security number (if 1099 contractor, check the box supplied),

• Payment terms

• Default expense category

• Opening balance

Partial view of a vendor record

Entering and Paying Bills

You may use QuickBooks Online’s bill-paying tools for payments that you will make later. This feature can be complicated, and you have multiple options. If you’re planning to pay bills through QuickBooks Online, we recommend you set up a session or two with us to go over the process. The recording and paying of bills need to be handled carefully to ensure the accuracy of your Accounts Payable reports.

We’ll describe a simple scenario here.  Select Get paid & pay in the toolbar, then Bills. The “control center” for your bills opens. Click Add bill in the upper right corner. You’ll see that you can create a bill by manually by completing a form  or uploading one from your computer (PDF, JPEG, JPG, GIF, and PNG images supported). QuickBooks Online extracts what it can and transfers it to a bill form on the site that you can edit to add any missing information.

Once you’ve created a bill, you can, for example, pay it by writing a check or using a credit card offline and then mark it as paid on the site. You can also let QuickBooks Online do that for you through its online bill-pay services (extra fees are involved). You can schedule bill payments, make them recurring, write checks, and record payments on the site.

Documenting Expenses

You’ll create an Expense record in QuickBooks Online (rather than a bill) if you’ve already paid for something. Click +New and select Expense or click Bookkeeping in the toolbar, then Transactions, then Expenses | New transaction | Expense. Complete the fields in the form as you would any other transaction form in QuickBooks Online. If the expense is billable to a customer, be sure to click the Billable column and select the correct Customer/Job.

If you download the QuickBooks Online mobile app, you’ll be able to take photos of receipts and upload them to the desktop site. Your receipt will be attached to the Expense on the desktop, but it will appear as pictured below on your phone.

You can snap photos of receipts with your smartphone, edit and add to them if necessary, and either save them as Expenses or match them to existing transactions.  

Purchase Orders

You may not have to deal with purchase orders unless vendors require them. If they do, click +New and select Purchase order. Complete the form and submit it to the vendor. Its status will be Open. When the vendor accepts it, QuickBooks Online can turn the purchase order into an Expense or Bill, whichever is appropriate.

Vendor Credits

QuickBooks Online allows you to process refunds you’ve received for business expenses. How you enter the refund depends on how you recorded the original purchase. You may need our assistance with these.

1099 Contractors

You can create records for 1099 contractors, write checks to them or process direct deposits, create expenses or bills for the payments, and prepare 1099s without subscribing to QuickBooks Payroll. There’s a small charge to create 1099s at the end of the year.

Complicated Tasks

Understanding your bill-paying options through QuickBooks Online can be a challenge, and you may be tempted to just write checks and mail your payments in. But then you won’t have the detailed Accounts Payable bookkeeping and reports that the site can provide, and you’ll only have a partial picture of your finances. Please let us know how we can help if you decide to automate this critical task.