Instructions for Fixing Accounts Payable Errors in QuickBooks
The quickest and easiest way to identify Accounts Payable errors in QuickBooks® is from a review of the Accounts Payable Aging Summary report. The Accounts Payable Aging Summary report provides a quick snapshot of the outstanding bills as of a specific date. Most of the outstanding bills should be relatively current. An aged bill in the >90 days may indicate an error or a transaction that requires an adjustment.
- Client enters bills and then writes checks
- There are unapplied vendor credits
- Accounts Payable balance is high with many aged bills
- Expenses seem unreasonably high
- The bank account balance appears correct
- Numerous unapplied vendor credits
Consistently old outstanding bills can also indicate a profitability or cash flow issue. A vendor that appears on the report and has a zero balance in the total column indicates that all transactions have not been “linked” or credits have not been applied properly.
Excessive amounts in the >90 days column is an indication of either a data entry issue or a larger issue that would require involvement of the management of the business.
Fix Unapplied Vendor Payments and Credits
In Client Data Review, the Fix Unapplied Vendor Payments and Credits tool corrects accounts payable posting problems. This feature works similar to the Unapplied Customer Payments to Invoices. Here, checks have been are written to Vendors instead of bill payments being used. Therefore, bills are still shown as outstanding even though checks have been written to the vendor or outstanding vendor credits are available but have not been applied to the bill. Checks and Vendor Credits are applied to bills in the same fashion as customer payments were applied to invoices as described in the Accounts Receivable section of this document.
Check Written Instead of Pay Bills
Accounts receivable issues often arise when clients first use Enter Bills to record an amount due but then use Write Checks instead of Pay Bills to pay these bills. Typically, the client would record the check to the same expense account used when the bill was recorded resulting in expenses being doubled. The Accounts Payable account would also be overstated and contain numerous old, unpaid bills which had in fact been paid.
Messaging has been improved in the latest versions of QuickBooks, encouraging users to Go To Pay Bills, however, this error may still occur. Two items to consider before deciding how to correct the problem are, first whether the client is on the cash or accrual basis of accounting and second whether or not the bank account has been reconciled.
Accrual Basis – No Bank Reconciliation
If the client uses the accrual basis of accounting and the bank reconciliation has not been completed, the incorrectly entered checks can be simply deleted and the checks re-entered using the Pay Bills function. Deleting transactions quickly is easy using the CTRL-D shortcut. Backing up the data file before making substantial changes is always encouraged. Also, a check register should be printed or check copies should be available to enable rerecording of the checks. The checks should first be reentered using the Bill Pay functions, then the checks appearing as a duplicate, not written as a bill payment can be deleted. Reentering the bills first will preserve the original input information, if it is needed, while entering the bill payments.
Accrual Basis – Bank Reconciliation Completed
For clients who use the accrual basis of accounting, the dates recorded on bills and bill payments are critical for proper reporting. If a payment to a vendor has already been entered as a check, not a bill payment check, and the bank reconciliation has been completed, deleting the check as described above will require redoing all of the bank reconciliations as far back as transactions are affected. This can be a very time consuming and tedious process. For this reason, the best solution is to change the account code on the check to Accounts Payable, ensuring that in the column entitled Customer:Job the vendor name is entered. A credit is created that can then be linked and offset to the bill that was created.
Step 1 – Correct Coding of Check
In the Vendor Center, locate the check that was entered incorrectly and edit the check changing the account to Accounts Payable and including the vendor name in the Customer:Job field as illustrated below.
Record the change. Complete this same procedure for all checks that should be linked to a bill.
Step 2 – Link Check to Bill
Next, go into Pay Bills and select the appropriate bill to pay and click on Set Credits as shown below.
Within the Discounts & Credits screen, select the appropriate credit, which will be the check that was just edited, to be applied to the Bill. (Note that the check number is in the reference field).
The credit will be applied to the bill and the Amount to Pay will then be zero. The transactions are then linked together.
Continue this process for the bills and checks that have been corrected and need to be linked. When the process is complete for all the transactions, click on the Pay & Close button. The Ending Balance for the Bank Account will not change.
A dialog box will appear that affirms that no checks will be generated.
Cash Basis – Bills Not Needed
If the client maintains their accounting system on the cash basis and accrual basis reports are not used or needed for management, historical or any other purpose, deleting the bills is easily accomplished. A review of the accounts to which the checks are recorded is recommended as the information recorded on the bill will no longer exist. If the client uses job costing, ensure the checks also have the job costing information recorded before the bills are deleted.
The easiest way to delete the bills is to go to the Accounts Payable register and delete them. The Accounts Payable register can be opened by going to the Chart of Accounts, selecting the Accounts Payable account and double clicking. Use the CTRL-D shortcut to quickly delete the unwanted transactions. If the bill has been paid, a dialog box appears with a warning message. If the warning message appears, cancel the deletion and investigate the checks applied or partially applied against the bill.
A review of the Unpaid Bills Detail report from Reports, Vendors & Payables, Unpaid Bills Detail can confirm that the remaining unpaid bills are what should be remaining in accounts payable.
Printing 1099-MISC Forms
Clients often have difficulties printing 1099-MISC forms. The process is simple and easily performed.
1. First, as vendors are established, their Federal ID numbers should be entered on the second tab of the Vendor Information. If the Vendor Eligible for 1099 box is checked, then a Federal ID number, either a Social Security Number or an Employer Identification Number must be entered before the Vendor can be saved.
2. Second, the accounts to which payments are made and for which 1099s should be generated must be identified. Under Preferences, the Tax:1099 option is opened and the accounts to which payments are made that should be reported on the 1099-MISC are selected. While currently these mostly include Labor and Rent accounts, legislation as currently enacted will require reporting of a wider class of payments to more vendors in future periods. If 1099-MISC forms are required to be sent to vendors for more than just labor or services in the future, additional accounts will be added in this section.
3. To print the 1099-MISC forms, from the Vendor menu, select Print 1099s/1096.
4. The 1099 and 1096 Wizard will be displayed and will step you through the process of generating the 1099 forms. Proper set up of the Vendors and mapping of the accounts will aid in resolving some of the issues that occur when trying to print 1099s.