How to Offset A/P With A/R When a Customer is Also a Vendor in QuickBooks

I could use some assistance in a transaction. I have a client that I also buy marketing events from. I am using my invoicing to pay for my events. It was suggested to me, to run both invoices and receipts through the clearing account, but I’m not quite sure how to do that. The client doesn’t submit bills–should I create them? Thanks for your help.
Here’s the process for using a clearing account to offset the accounts receivable owed to you with the accounts payable owed from you, when you have a customer who’s also a vendor:

    1.    Go to Lists > Chart of Accounts, click on the Account button, select New and create a new bank account called Clearing Account.
    2.    If not entered already, enter the invoice (Customers > Create Invoices) and bill (Vendors > Enter Bills) you want to offset.  QuickBooks won’t let you use the same exact name for both a customer and a vendor so you’ll need to change them slightly

    3.    Go to Vendors > Pay Bills, select the bill you want to pay and enter the amount you want offset by what your customer/vendor owes you.  If it’s less than the entire amount of the bill, change the amount in the Amt to Pay box.  Use the Clearing Account as the account.  You may also want to use something like Offset for the Check No.

    4.    Go to Edit > Preferences > Sales & Customers > Company Preferences and uncheck the box next to Use Undeposited Funds  as the default deposit to account

    5.    Go to Customers > Receive Payments, select the customer account for your customer/vendor, enter the amount you want offset by what you owe, deposit to the Clearing Account, and select the invoice you want to apply the payment to

    6.    The Clearing Account should always have a $0 balance so make sure that the amounts you entered in Pay Bills and Receive Payments exactly match.  

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This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.

Ruth Perryman - QuickBooks Specialist Written by +Ruth Perryman

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