The MacGyver-esque way to handle barter in QuickBooks Online

The MacGyver-esque way to handle barter in QuickBooks Online

Recently, my cousin Howard, a CPA in Toronto, called to ask me if there’s a better way to move balances between accounts receivable and accounts payable for a customer who is also a vendor/supplier in QuickBooks® Online. In other words, he wanted a quicker and easier way to handle barter transactions in QuickBooks Online.

A quicker and easier way than what? Many of us know the answer to that: it involves a fake barter bank account and a series of transactions to move the balances around, using that account and zeroing it out by the end. In fact, I even have that listed on the Goodies, Tips & Tricks page on my company’s website. I wrote up that tip years ago based on QuickBooks Desktop, and it works for QuickBooks Online as well. That’s fine, but as Howard indicated, it’s somewhat convoluted.

I had just finished a full day of teaching QuickBooks Online certification training when I returned Howard’s call, and so the answer to his question was fresh on my mind: QuickBooks Online journal entries!

I’m not usually a big fan of journal entries, as most of my ProAdvisor® friends know, because I generally prefer to use transaction-specific forms, if at all possible. But, in this case, let’s not forget that QuickBooks Online allows us to list multiple A/R and A/P lines in a journal entry (accompanied by customer names for A/R and vendor names for A/P). Could there be a simpler way to move a balance from A/R to A/P, or vice versa? I don’t think so!

Let’s look at the example using Craig’s Landscaping, the US Test Drive company, below:

Esther’s Bird Sanctuary is both a customer and a vendor, so we have set it up as two slightly different names on the Customer and Vendor/Supplier lists in QuickBooks Online.

In the Open Invoices view of accounts receivable, we see that Esther’s Bird Sanctuary (customer) owes Craig $2,739.

In the Unpaid Bills view of Accounts Payable, we see that Craig owes Esther’s Bird Sanctuary (vendor) $2,000.

Clearly, Esther’s Bird Sanctuary should ultimately owe Craig a net of $739 and that should be the end of it. There shouldn’t be payments back and forth. Here’s how we net out A/R and A/P in QuickBooks Online using a simple journal entry:

Now, the balances in A/R and A/P are correct, with Esther’s Bird Sanctuary (customer) owing $739 and Esther’s Bird Sanctuary (vendor) being owed $0:

We can leave the Open Invoices report as it is, with the $2,000 journal entry displayed as an outstanding credit until Esther’s Bird Sanctuary pays, or we can create a $0 Receive Payment transaction to apply the $2,000 against the $2,739, so that only the $739 remains:

And, just to be tidy, we can create a $0 Bill Payment to apply the $2,000 journal entry to the $2,000 bill:

And, remove them both from the Unpaid Bills report:

Easy-peasy. There’s no fake barter bank account that I have to zero out and remember to make inactive. All it takes is a simple journal entry without any limits on the number of A/R or A/P rows. Howard, I owe you one. Without your question, I wouldn’t have given this a second thought.

This has been my easiest hack so far. I’m not even sure it’s deserving of the name MacGyver.