A small retail store calls the Data Detective for help because the owner has noticed that their QuickBooks Balance Sheet contains a large amount under a current liability account called “Unbilled Purchases”. They also are concerned by the fact that their Inventory Asset account seems too high in comparison to the value of their inventory listed in QuickBooks Point of Sale.
Upon reviewing their data, our Sleuth quickly determines that the Unbilled Purchases account contains a significant number of journal entries that have never been cleared. Further examination reveals that Vendor Bills have been entered and paid for amounts corresponding to almost every journal entry in the Unbilled Purchases account.
This is not the first time the Data Detective has seen this situation; he knows that it arises from how certain preferences are set, and perhaps changed in, QuickBooks Point of Sale. In this case it appears that either the preference was initially set to one option, and then changed; or that the staff was improperly instructed on how to properly post vendor billing information.
When using QuickBooks Point of Sale you have two choices how Vendor Bills can be handled; once you make your choice you should stick with that choice unless you are thoroughly aware of the necessary steps to make the change from both an operational and financial standpoint.
Preference Settings and Financial Exchange of Receiving Vouchers
If you prefer to handle all vendor billing tasks in QuickBooks financial software, rather than in Point of Sale, you should retain the default (unchecked) setting* found in Company Preferences for Receiving “Enter Vendor Billing Information in Point of Sale ” (Shown above). When this default preference is in force:
- The vendor billing fields (payee, terms, bill date, invoice/reference #) are NOT available on the receiving voucher form in Point of Sale
- All vouchers are sent immediately to QuickBooks as Item Receipts; if you have chosen the Company preference in Point of Sale to send detailed item information to QuickBooks, the item receipts will contain the individual items.
- When the billing information is received from the vendor, enter it in QuickBooks and the Item Receipt is converted to a Vendor Bill in Accounts Payable
If the vendor billing information received and entered in QuickBooks includes charges or adjustments not entered on the original voucher in Point of Sale, such as a freight charges, discounts, or fees, there will be a difference between the documents in the two programs unless you also edit the voucher in Point of Sale to add these items.
*-Note: in versions of Point of Sale prior to Version 6.0, the default preference was checked to “Enter Vendor Billing Information in Point of Sale”, when upgrading from Version 5.0 or earlier, the prior preference setting is retained.
In some cases you may need to change the Vendor Billing Information Company preference in Point of Sale so as to enter billing information in Point of Sale rather than in QuickBooks. One potential reason for doing so is that Point of Sale allows you to optionally spread vendor discounts, freight and fees across all items on the voucher. This function is not a capability of QuickBooks financial. You must be aware that changing this setting significant alters how Receiving Voucher information is sent to QuickBooks financial during financial exchange. When this preference option is in force the vendor billing fields (payee, terms, bill date, invoice/reference #) are added to the receiving voucher form in Point of Sale.
Receiving vouchers are now sent to QuickBooks in different ways, depending on whether billing information (Invoice/Ref#) has been entered:
- If billing information is entered in Point of Sale when the voucher is initially created, the voucher is sent directly to Accounts Payable as a Vendor Bill. No Item Receipt is created in QuickBooks financial.
- If billing information is not initially entered, the voucher is sent to a current liability account in QuickBooks financial called Unbilled Purchases as general journal entry. After the voucher is edited in Point of Sale to add the required billing information, the voucher is sent a second time as a bill to Accounts Payable and removed from the Unbilled Purchases account.
- If the Already Paid checkbox is selected (meaning you have prepaid the vendor for the merchandise), the voucher is sent as an item receipt whether billing information is entered or not. No general journal entry is made. You should manually apply the previously made amount to the item receipt in QuickBooks.
- If a voucher with un-spread fees and/or discounts is sent to Unbilled Purchases, the fees and discounts will not be taken into account on the initial general journal entry. Instead, the final Vendor Bill sent to QuickBooks financial (once the invoice for the voucher has been received) will be adjusted to reflect any fees or discounts. If you spread these amounts over the item costs, the amounts will be reflected in the net item costs.
Back to the circumstances of the Data Detective's 'case'.
It turns out that the business hired a new bookkeeper a few months back, and she had never worked with Point of Sale, but had an extensive QuickBooks background. While the retailer had always entered vendor billing information in the past in Point of Sale, the new Bookkeeper was now posting the Vendor Bills directly in QuickBooks while the sales staff continued to actually receive the inventory in Point of Sale. Point of Sale was sending the receiving voucher to QuickBooks as a journal entry posted to the Unbilled Purchases account. Because the staff never entered the billing information, the journal entry was never reversed as part of being converted to a Bill. The result was the Inventory was overstated and the Unbilled Purchases liability account continued to increase.
After a little work to change the Point of Sale preference, correct the erroneous postings, and providing needed training to all concerned, the problems were resolved. One thing our Sleuth did just before departing was to remind them that they can always see how Point of Sale transactions are posted in QuickBooks; in the case of a receiving voucher it can be tracked from the Point of Sale receiving history list by highlighting it in the list, then clicking on the ‘I want to…’ menu and selecting the “Show Financial Details” option.
Passing data from Point of Sale to QuickBooks is simple as long as you understand the preference options, and follow the proper steps; really "it's Elementary My Dear Watson."