Many times when you purchase inventory from a vendor/supplier you will not physically receive the inventory for a period of time. How do you show a payment to your vendor in QuickBooks Online without increasing your quantity on hand for the inventory until you physically receive the item?
The steps below work well if you don't want to see a credit in AP or when you want to separate prepaid inventory from the inventory asset account.
In this case you can create a PO when the order is placed. Then write a check/cheque to the vendor/supplier and categorize the payment under a prepaid inventory account. When the inventory is physically received, you can roll the PO to a bill for that vendor/supplier. On the previously written check/cheque, you would re-categorize the payment to Accounts Payable which will create a credit for the Vendor/Supplier. The final step is to match the credit to the bill
Here’s how:
1. Choose Plus Sign Icon > Purchase Order.
2. Fill in the appropriate fields selecting the product/service you are purchasing in the Itemize by Product/Service section.
3. Click Save.
Next, pay your vendor/supplier:
1. Choose Plus Sign Icon > Check/Cheque.
2. Select the vendor/supplier; in the Itemize by Account section choose an other current account such as Prepaid Inventory and enter the amount of your payment.
3. Click Save.
When the inventory arrives:
1. Choose Plus Sign Icon > Bill and select the vendor/supplier for whom you created the purchase order.
2. When you select the vendor/supplier, any open purchase orders for that vendor/supplier will appear along the right side.
3. Locate the purchase order you created and click Add Purchase Order.
4. Click Save.
Locate the original check/cheque payment made to this vendor/supplier, then:
1. In the Check/Cheque screen, change the Account to Accounts Payable.
2. Click Save.
The final step is to show the bill you created for your vendor/supplier as paid.
To do this:
1. Choose Plus Sign Icon > Check/Cheque.
2. Select the vendor/supplier from the drop-down list.
2. In the Credits section, click to select the payment.
3. In the Bill Payment Information section, select the bill to match to the payment.
4. Ensure that the Amount field at the top, under the Date, is blank.
5. Click Save.
NOTE: If you don't want to follow the above process, you can create a PO when the order is placed, enter a bill payment check/cheque, and establish a credit for the vendor//supplier. Then when the items are received, convert the PO to a bill and apply the previous bill payment to the bill.