How to Enter and Pay Vendor Bills in QuickBooks Online

Overview: How Bills Flow in QBO

QuickBooks Online (QBO) lets you record bills when you receive them, keep them outstanding until paid, and then apply payments to close them. This supports accurate accrual accounting and gives you real‑time visibility into cash needs and vendor balances.

Before You Begin

• Add suppliers: Go to Expenses → Vendors/Suppliers, select New vendor. Enter legal name, payment terms (e.g., Net 30), address, W‑9/1099 preference, and default expense account if desired.
• Turn on features: In Settings → Account and settings, enable Location and Class tracking (if used), Billable expenses, and Attachments. For U.S. users who need online bill payments, enable QuickBooks Bill Pay and connect your bank.
• Products & services: If you purchase inventory or non‑inventory items, verify they exist under Settings → Products and services with correct expense or inventory accounts.
• Chart of accounts: Create expense accounts (e.g., Utilities, Office Supplies), COGS, and any asset accounts (e.g., Prepaid expenses) you’ll need.

Step‑by‑Step: Enter a Vendor Bill

UI wording can vary slightly (e.g., Get paid & pay vs Expenses) but the workflow is the same.

1. Open the bill form: Select + New → Bill (or go to Expenses → Bills → New bill).
2. Choose the vendor: Start typing to search. If missing, create the vendor on the fly.
3. Check Terms, Bill date, and Due date: QBO calculates due dates from terms (e.g., Net 15/30).
4. Enter reference no. from the vendor invoice for easy matching.
5. Attach the document: Drag the PDF/image into Attachments for an audit trail.
6. Add lines:
   • Category details — post directly to expense, COGS, or asset accounts (e.g., Utilities).
   • Item details — choose a Product/Service. For inventory, QBO updates quantities when you receive items and later sell them.
7. Dimensions: Select Location and Class if enabled.
8. Billable expenses (optional): Mark a line as Billable, choose the customer/project, and set a markup if applicable.
9. Sales tax on purchases: If you track use tax, note it in a separate line or use your configured tax workflow per your advisor’s guidance.
10. Memo for internal notes (e.g., “March water service”).
11. Save: Click Save and close, Save and new, or Save and schedule payment if Bill Pay is enabled.

Step‑by‑Step: Pay or Schedule Bills

There are two common paths: Pay bills in-core (check/ACH) or QuickBooks Bill Pay (U.S. online bill pay add‑on with scheduling and approvals).

A) Pay bills (core)

1. Go to Expenses → Bills (or Get paid & pay → Bills) and select Pay bills.
2. Filter by vendor, due date, or currency. Tick the bills to pay.
3. Choose the Payment account (e.g., Checking) and Payment date.
4. Select Payment method:
   • Check — choose Print later to queue for check stock, or enter a check no. if handwritten.
   • Bank transfer/ACH — if enabled via your bank/bill pay setup.
5. Review Total to pay, confirm, then Schedule/Pay.
6. If printing checks, go to + New → Print checks, load check stock, and print.

B) QuickBooks Bill Pay (U.S. add‑on)

1. Connect your bank and complete the identity checks.
2. From Bills, pick one or many bills and choose Schedule payment.
3. For each bill: set the delivery method (ACH or mailed check), payment date, and approval (if your plan supports approvals).
4. Confirm the Withdraw on and Deliver by dates. QBO posts the Bill Payment (Check/ACH) and marks bills as Paid on the payment date.

Vendor Credits & Early‑Payment Discounts

Record a vendor credit

1. Choose + New → Vendor credit.
2. Select the vendor and add lines that mirror the original bill (Category/Item, class/location).
3. Save. The credit increases vendor balance in your favor.
4. Apply the credit: Open Pay bills, select the bill, and QBO shows Credits available. Check the credit to apply; verify the new Amount to pay.

Early‑payment discounts

If terms include discounts (e.g., 2/10, Net 30), reduce the payment to reflect the discount and post the difference to a Purchases discounts income/contra‑expense account as your accountant prefers.

Partial Payments, Split Payments & Overpayments

• Partial: In Pay bills, edit the Amount to pay. QBO keeps the bill open for the remainder.
• Split across methods/accounts: Pay part by check and part by ACH by recording two payments on the same day with different methods/accounts.
• Overpayment: QBO leaves a vendor credit. Apply it to a future bill or refund.

PO & Receiving: Item vs Category (What to Use When)

PO/Receipt flow: Create a Purchase order, mark items Received, then convert to a Bill. This helps with 2‑ or 3‑way matches and prevents paying for items not received.

Match Bank Feed & Reconcile

1. After payments post, go to Bank transactions/Transactions and Match the bank feed entry to the bill payment. Avoid adding a new expense from the feed for the same bill.
2. Each month, Reconcile checking/credit card accounts to the bank statement: Settings → Reconcile.
3. Run A/P Aging Summary and Unpaid Bills reports to review outstanding items and verify there are no negative vendor balances.

Common Mistakes to Avoid

• Paying directly from the bank feed without closing the bill. Always use Pay bills so A/P decreases and the bill is marked paid.
• Duplicating expenses. Entering a bill and recording a separate expense/check for the same invoice creates duplicates.
• Using the wrong detail section. Choose Item details for inventory/POs; use Category details for period costs.
• Wrong vendor or missing reference no. This makes matching and audit trails harder.
• Ignoring terms and due dates. Leads to late fees and poor cash planning.
• Booking capitalizable costs to expense. Large equipment or prepaid services may need to post to asset accounts and be amortized/depreciated.
• Using journal entries to “pay” bills. Use Pay bills to preserve vendor sub‑ledger detail.

Helpful Tips & Best Practices

• Inbox to bill: Email vendor invoices into your QBO documents inbox (or drag‑drop) for quicker entry and attachments.
• Approvals (if available): Route large bills for approval before payment.
• Cash forecasting: Use the Bills list filters (Due this week, Next 30 days) to plan payments and negotiate terms.
• Locations & Classes: Tag spend to departments or sites for cleaner P&L by segment.
• Memorized details: Set default expense accounts and terms at the vendor record to reduce entry errors.
• Use projects: Mark expenses as billable to track true project profitability and invoice clients quickly.
• Close POs: Regularly close fully‑received POs so they don’t linger on reports.

Compliance & Internal Controls (U.S.)

• W‑9 & 1099‑NEC: Collect W‑9s from eligible vendors; mark 1099 vendors in the vendor profile and map boxes correctly for year‑end filing.
• Segregation of duties: Ideally, different users enter bills, approve, and release payments. Use user roles and approval workflows where available.
• Record retention: Keep invoice copies attached to bills in QBO for audits and vendor disputes.
• Use tax / sales tax on purchases: Follow your state’s rules for use tax on out‑of‑state purchases; consult your accountant for setup.
• Cutoff & accruals: At month‑end, ensure all received goods/services are recorded as bills or accruals so liabilities and expenses are complete.

Real‑World Scenarios

FAQ

What’s the difference between an expense and a bill?

Expense records a payment you made now (cash basis). A Bill records what you owe today for payment later (accrual basis) and appears in A/P until paid.

Can I pay multiple bills at once?

Yes. In Pay bills select several vendors/bills and confirm a single payment date. If using checks, you can print them in one batch.

How do I handle vendor refunds?

Record a Vendor credit. If you received cash back instead, record a Bank deposit to the cash account using the Accounts Payable account, then link it to the vendor credit to clear.

What if a bill was entered to the wrong account?

Edit the bill and adjust the Category/Item lines. If the period is closed, consult your accountant about posting an adjusting entry.

How do partially received POs work with bills?

Receive the items you actually got; QBO converts the received quantity into a bill. Remaining items stay open on the PO until received.

How do I avoid duplicate payments?

Always enter the invoice reference no., attach the PDF, and use Pay bills (not ad‑hoc expenses). Review the Open bills and Vendor balance detail reports regularly.