In the QuickBooks online there is a crucial job to manage business financial reports and vendor credit reports. Controlling the cash flow and reducing excessive expenses also play an important role in managing your business. QuickBooks Online helps you with various problems related to vendor credit such as overdue payments, payments received, good returns, etc. Your business will be impacted by these factors in future payments and keeping your books accurate. This blog explains how to apply vendor credit in QuickBooks Online and other aspects like entering vendors, creating vendors, and using vendor credit.
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What is Vendor Credit in QuickBooks Online?
It is a feature of QuickBooks software that assists you in controlling your business financial reports. You can check and manage past or future invoices or bills by applying vendor credit in QBO. With the vendor credit feature, you can track and apply vendor credits to business transactions. It will also aid you in making a barrier in your excessive cost that might used in forthcoming jobs.
Applying vendor credit in QuickBooks Online is very crucial to avoid duplicate expenses or payments. It will record the balance report that reflects your accurate business reports and prevent you from overpaying the clients.
Why is Apply Vendor Credit in QuickBooks Online beneficial for business?
It is a crucial feature for the business person when the vendor receives the items from you. Here are some essential reasons to apply vendor credit in QuickBooks Online:
- Accuracy in Finacial Reports: It ensures that applied vendor credits are recorded expenses and payable accounts accurately. This feature prevents your financial report discrepancies.
- Avoid Similar Payments: If you don’t apply a vendor credit, you might finish paying a bill partially covered by the credit.
- Improve Vendor Relationship: It helps you to recognize the payment due date. Making timely payments to the vendor improves the vendor relationship.
- Streamlined Operations: You can secure and prevent report confusion or vendor misunderstanding by applying vendor credits in QBO.
How to Apply Vendor Credit in QuickBooks Online?
To apply vendor credit in QuickBooks Online and to get effective accounting procedures, you have to follow the steps given below:
Step 1: Record the Vendor’s Credit
You have to record the vendor credit in QBO before applying vendor credit in QuickBooks Online. Follow the steps given below:
- Firstly, you have to open QuickBooks Online software and then navigate to the Expenses menu.
- Choose the Vendors tab from the drop-down menu.
- Locate the vendors from the vendor list by entering the name of the vendor that issued the credit.
- Now, you can create a vendor credit by clicking on the Create Credit button.
- After that, you have to provide the appropriate information in the Vendor credit screen:
- Vendor Name: Make sure, it’s the right vendor.
- Date: Enter the date on which you received the credit.
- Credit Amount: Enter the amount of the credit.
- Category: You must select the appropriate category (Inventory, Services, etc) if you have a problem with a return or overpayment.
- Ensure that all the credit details are accurate that you enter.
- After completing all the steps click on the Save and Close button to save vendor credit.
Step 2: Apply Vendor Credit to an Open Bill
You can apply the vendor credit to an open bill or an unpaid purchase after you’ve recorded it. Now, look for the steps:
- Go to the expenses section in the QuickBooks Online software.
- Visit the Vendors tab, navigate to the vendor list, and find the vendor that you want to discover.
- Now, apply the credit and open their profile.
- Find the Open Bill and select the appropriate credit that you want to apply.
Note: If there are several bills then select the one that you want to settle.
- Now, open the bill, and click on the Apply credit or Make Payment option.
- After that, a window will pop up that displays available credits.
- Now, choose the vendor credit that you want to apply.
- Verify the credit amount applied to the bill. You can adjust the amount if needed (if you only want to apply part of the credit).
- Review the payment details to ensure the credit is applied correctly.
- Click the Save and Close tab.
QuickBooks automatically updates the outstanding balance with the vendor when you apply the credit to the open bill. This ensures that you only pay the remaining amount due after the credit is applied.
Step 3: Apply Vendor Credit to Multiple Bills
This step is essential for you if you have several bills from the same vendor. You can spread the vendor credit of all multiple bills and you can apply vendor credit to multiple bills.
- Navigate to the vendor profile from the Vendors section.
- Locate the appropriate bill.
- Click on the Apply Credit option and select the vendor credit that you want to apply.
- Repeat the process for all the bills that you want to distribute. Make sure that the amount of the credit is applied to everyone.
- QuickBooks automatically updates all the balance and account payable reports after you have applied the credit.
How to Enter Vendor Credit in QuickBooks Online?
To record credit transactions accurately, you have to create the credit transaction in QB Online. Before going to creating vendor credit you have to follow these steps:
Step 1: Access the Vendor Credit Section
- Firstly, log in to the QuickBooks Online software and then navigate to the Expenses menu.
- Choose the vendors tab from the drop-down menu.
- Find the vendor that you want to give the credit to from the list of vendors.
- After finding the appropriate vendor, click on their name to see their details.
Step 2: Create the Vendor Credit
- To create a new credit for a vendor, look for the Create Credit or Enter Vendor Credit option in the vendor profile.
- You have to click on the Create option which will take you to the Vendor Credit page.
Step 3: Enter the Vendor Credit Details
Navigate to the Vendor Credit page and fill in the essential details about the credit that you received.
- Vendor Name: Choose the correct vendor name. If the name isn’t already filled in, select the vendor from the drop-down list.
- Date: Enter the date you received the credit or the date on the credit note provided by the vendor.
- Credit Amount: Enter the total amount of the vendor credit.
- Category: Choose the appropriate category or account according to the credit. For example, If the credit is related to returned goods, choose an Inventory account.
- Description: It is an optional field, you can add a description like Credit for the returned goods.
- Tax: If it is allowed then you can apply the tax rate to the credit. If the credit relates to returned goods that were originally taxed, it will affect your tax reporting.
How to Use Vendor Credit in QuickBooks Online?
Using vendor credit in QBO is very beneficial for your future balance reports, invoices, and bill payments.
Use Vendor Credits to Make Bill Payments
- Go to the QuickBooks Online software and then select the Vendor Credit option.
- Fill up all the essential details that are required.
- After that, navigate to the menu tab and select the pay bills option.
- And choose the appropriate vendor bills carefully.
- After all the processes review the transactions.
Use Vendor Credit for Future Purchases
If the vendor credit is not applied to an outstanding bill, you can leave it in QuickBooks to apply to future purchases from that vendor. This credit will remain in your system until you decide to apply it. QuickBooks allows you to apply the available credit when you create a new bill.
- Simply navigate to the available list and then choose the right credit.
- Now, QuickBooks will apply it to reduce the amount due on the new bill.
How to Create a Vendor Credit in QuickBooks Online?
- Log in to QuickBooks Online: Login with your ID & Password in the QuickBooks Online program.
- Click on Expenses Menu: Select the Expenses option from the left side of your desktop screen.
- Click on Vendors: In the Expenses section, find the appropriate vendor from the vendor list.
- Select the Vendor: If you cannot find it, click on the New Vendor at the right top of the page.
- Create Vendor Credit: Go to the vendor’s account and then click on the Create Credit option,
- Enter Credit Information: Fill up the details that are given below:
- Date: Input the date when the vendor granted credit.
- Amount: Input the total amount for the credit.
- Category: Select the correct account or category where the credit can be classified (for instance, Inventory, Office Supplies, or Other Expenses).
- Description: Attach a short description explaining why this credit was raised. You can use examples such as “Returned damaged goods”.
- Save the Vendor Credit: Once you fill in all the information, click on Save and Close to finalize the credit raised by a vendor. Alternatively, Save and New if you have more credit to enter.
Conclusion
Applying vendor credit in QBO is a simple process that can save your business cost and time. With this method, your financial reports will be safe and secure. You can apply vendor credit in QuickBooks Online by following the steps outlined above and also find information on entering vendor credits, creating vendors, and using vendor credits. You can reach out to us if you have any problems with vendor credits.