Tag: Vendor Credits

Use Vendor Credits in QuickBooks Online for Refunds and Credits

May 23, 2019

Learn how to properly record and track credits or refunds issued to you by your supplier or vendor in QuickBooks Online.

If you’re new to retail or selling online, then you’ll eventually encounter a situation where you’ll have to handle a supplier credit or refund.

Just ignoring the refund or simply creating a deposit isn’t good practice since that doesn’t accurately track why you received that money.

By tracking supplier refunds, you’ll not only have a better idea of where your money is coming from, but also potential issues from your suppliers. These issues can mean anything from poor quality control to incorrect shipments.

Creating a vendor credit

The first thing you’ll want to do is create a vendor credit form. Select Vendor Credit from the Quick Create Plus (+) icon.

You’ll want to select the vendor, enter the correct date, and select the account and refund amount on the form.

You may also want to enter a description and memo as a reminder should you need a reference later on. It’s also helpful when you run reports or search later on.

The next step depends on whether you’ve been issued a refund or credit that you can apply toward future purchases.

Creating a bank deposit and linking it to the vendor credit

Once you’ve saved the vendor credit, you’ll want to create a bank deposit for the refund amount if you’ve been issued a refund.

Go to the Quick Create Plus (+) icon and select Bank Deposit.

Select the bank account and confirm the date is correct.

Make sure you select the correct vendor from the “Received From” column and the Accounts Payable (A/P) account.

Enter the correct amount. While the Description and Memo fields aren’t necessary, you’ll want to leave yourself some note so that you’ll know what the transaction is for when you run reports.

These notes also help when you’re searching for documents.

Save and close.

Now we have the vendor credit form and the bank deposit, but they’re not linked.

The last step in this process is to create a check to link the two transactions.

To do this, we’ll create a check.

Click on the Plus (+) icon and select Check.

On the Check document, select the Vendor from the dropdown menu and the bank account you’ve selected for the refund.

Once you select the vendor, QuickBooks Online will show both the bank deposit and the vendor credit on the right window. Click on the Deposit and then the Vendor Credit.

If you have multiple transactions there, make sure the amounts are the same and that you’re linking the correct transaction documents.

The total amount should be $0.00 since we’re just linking the transactions.

Note: if you get a “You must select a bill before adding a credit” window, then you’ll need to click on the Deposit first.

Save the transaction.

That’s it! You’ve created a vendor credit, a bank deposit, and you’ve linked the two transactions to process a refund from your supplier.

Applying the vendor credit to a new bill

Sometimes, suppliers will give you a credit toward your next purchase instead of a refund.

Common reasons for credits include defective or damaged inventory that you can send back or destroy for credit toward future bills.

The first step is to create a vendor credit. Refer to the instructions above for how to do this.

Once you have the vendor credit document, you’ll see a negative balance for your vendor. In the image below, we have a $40 vendor credit balance.

The next time you go to pay a bill, this credit is applied to that transaction.

If not, you’ll want to confirm that you’ve selected the correct vendor. A window will show up and you can apply the credit to the document. Below is an example of a bill for $100.

When you click on Make payment, QuickBooks Online will automatically apply the credit to the bill. Confirm that the credit has been applied. You’ll see it below.

If not, you’ll have the option to select the vendor credit to apply to the bill. If the credit doesn’t appear, then make sure you’ve selected the correct vendor and that the dates are correct.

Note: if you get a “You must select a bill before adding a credit” window, then you’ll need to click on the Bill first.

Once you save, you’ll see the bill payment with the applied credit and the remaining balance.

Credits can only be applied to open bills. If you’re getting errors like the credits not showing up for your bill payments, make sure to check the dates on the documents and make sure you’ve selected the correct vendor.

Linking vendor transactions is important in QuickBooks Online.

Unlinked transactions lead to large open balances on your vendors that can interrupt or confuse employees when they go to create and pay bills.

This will also give you incorrect figures when you run reports that include your vendors.

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Properly Adjusting QuickBooks Online Inventory

May 16, 2019

Learn how to properly adjust your inventory for failed returns or lost inventory in QuickBooks Online using the correct documents.

Tracking your inventory with the proper documents can give you more detail about your business. By using the right documents, your reporting will be more correct and you can make more informed decisions.

Failing to accurately track your documents can lead to issues with order fulfillment and unhappy customers, amongst other issues.

This article will go over ways sellers can properly adjust inventory using QuickBooks Online documents for $0. Some cases include damaged returns, lost inventory, or other shrinkage.

We won’t cover sales and refunds since those are straightforward.

Documents that affect inventory

Depending on how you manage your inventory in QuickBooks Online, there are going to be multiple ways you can handle your inventory adjustments.

How you manage adjustments will depend on what has happened.

Handling a return of a damaged product is going to be different from handling damaged inventory that your supplier refunded.

We’ll go through some different options, and you can decide what works best for your business. These options aren’t necessarily limited to the situations described.

Inventory quantity adjustment

You can create an inventory quantity adjustment document found under the Plus icon > Other.

Using inventory adjustments is a quick way to record changes in inventory.

When you create an inventory quantity adjustment document, QuickBooks Online will automatically post the loss (or gain) to a “Cost of Goods Sold – Inventory Shrinkage” account.

Make sure you enter a reason for the adjustment in the Memo field so that you can always refer back to it later.

Since QuickBooks Online uses FIFO accounting, the COGS is based on the date of the transaction and the last bill entered.

This will affect your profit and loss reports accordingly.

See below for a product report showing the inventory quantity adjustment and the changes to the accounts:

Creating a sales receipt for $0

When you create a refund in QuickBooks Online, inventory will increase by the quantity on the refund document.

Some sellers will just throw out or destroy damaged returns. Or they issue a free replacement to the customer.

One option to handle customer-related issues to reduce inventory is to create a sales receipt for $0. This will adjust the COGS and Inventory Asset accounts.

When you look at your balance sheet or run a profit and loss report, your accounts will be correct.

Here’s an example of a report on the product with a $0 sales receipt and the affected accounts.

Using credit memos for $0

Whereas the sales receipt will reduce the inventory accounts, a credit memo will increase your inventory quantity and accounts. Like sales receipts, credit memos are related to customer issues.

Amazon sellers are more likely to use this because of the delay between a refund and a return. For instance, if you sell through FBA, then it can sometimes take more than 60 days for a return to get back to you.

That’s because customers have 30 days to request a refund, another 30 days to return it, and then there’s the delay for removal orders. This process may take even longer during the holidays because of extended returns.

Meanwhile, you may have created an invoice for the sale, a refund, and a sales receipt for the loss of the item. On day 70, when you receive the item to inspect, it may still be sellable.

If that’s the case, you can use a credit memo for $0 to offset the sales receipt for $0 that you created previously to write off the item.

Credit memos will use the COGS from the last bill that you entered unless you enter a value.

Below, you can see the exact transaction described above. Note that since the item is sellable (returned in new condition), all the affected accounts are back to their original values.

Use vendor credits for $0 to remove inventory

As the name suggests, these documents are related to vendor issues.

Vendor credits will remove inventory. There are several reasons why you’d use this, but common reasons include lost, damaged, or defective inventory.

Vendor credits will also affect your inventory asset and cost of goods sold accounts. This is likely more common if you sell through Amazon FBA. If Amazon loses inventory, then you can account for it with a $0 vendor credit.

Vendor credits will use the values calculated from your last bill or expense.

If you were credited or refunded, you’ll have to deal with that transaction as well.

The behavior similar to a sales receipt for $0, except it’s through the vendor instead of the customer.

Use vendor expenses for $0 to increase inventory

When you create a vendor expense document, it will increase inventory. Item expenses are treated like bills and checks, so they’ll affect your inventory accounts in the same way.

You may sometimes receive extra inventory. You can account for the extras using $0 vendor expenses. Because the amount is $0, the Inventory Asset and COGS accounts won’t be affected, and a sale of the item will record properly. Essentially, you’ve received free items.

Since QuickBooks Online uses FIFO, that $0 vendor expense will be used for future COGS calculations unless you enter more recent bills or expenses.

You’ll want to be careful about this or you may end up with inflated numbers when you run profit and loss reports.

Here’s an example of a Vendor Expense for $0 and subsequent transactions with no other future bills or expenses. Note the inventory accounts for future transactions also show $0 since no other bills were entered after the $0 expense.

Adjusting starting inventory

Generally, you’ll want to avoid manually adjusting inventory start quantities.

Instead, use Purchase Orders and bills or expenses to receive inventory into QuickBooks Online. And use the proper documents for inventory (like invoices and refunds).

Starting inventory may be used if you’re starting a new company or book. Be sure to enter the starting value if you do this or your inventory asset and COGS accounts will show $0.

Without the proper documents or reasoning, making numerous adjustments to the inventory start quantity can be very confusing to other people unless they know to go through Advanced Search or Audit Log to track down each adjustment.

Even then, if there are no reasons written in the Memo field, reconciling inventory and accounts can be frustrating and problematic if you constantly change the starting quantity.

No matter how you handle adjustments to inventory, you’ll want to be as precise and consistent as possible. Whatever rationale you use for the documents, you should keep to it.

By recording the right transactions to adjust your inventory, you’ll have a better understanding of how and why your inventory is moving.

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