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Discount invoice for Purchasing

how to record vendor discounts in QuickBooks hey everyone my name is Matt Holquist with the QuickBooks University and before we get started if this video is helpful please subscribe to my channel uh the QuickBooks University and also like the video also check out the master class uh over at qbuniversity.org I put a link in the first comment so I pinned the first comment I put a link down there it's very simple click on that sign up for the master class there you're going to get a 30 discount on our QuickBooks University training so in this video what I want to talk about is how to record vendor discounts in QuickBooks and a lot of people get this uh wrong and they have a lot of questions about it I had some questions just this past week from some members on what's the best way to do this so I'm going to show you two ways to do this in this video one is going to be if you have certain terms from a vendor and the other one is if they for some reason give you just a discount for paying early and you don't have the term set up okay so first things first what we're going to do you want to go to the company drop down menu and we're going to go to chart of accounts because the first thing is we have to set an up account where we want this discount to go now generally this is going to be either a cost of goods sold or an expense account now I know that the first question people have is well if this is not an expense it's kind of a negative expense if you want to think about it that way it's it's lowering your expenses then why would you set it up as an expense well the reason is because this will give us a more accurate reflection of our gross profit margin if we're offsetting against cost to get sold or our net profit margin if we're offsetting against expenses so I tell people you know don't put it as other income or something like that so a discount is a reduction of your expenses we want to just offset it against whatever expense account that we originally put that expense to okay so a lot of times this is going to be for early pay discounts so you may order something you may buy something and your vendor says you're gonna you know if you pay within 10 days you get a two percent discount over 30 days one percent discount you know whatever the case may be or sometimes they may just say hey you know what uh you ordered this and if you can pay us in the next uh week we're going to give you a discount of a certain amount I've had I've had clients do that where they're just trying to speed up their collections they don't normally give early pay discounts but they will get on the phone they will call their customers and say look if you pay us by ACH in the next three days we're going to give you a certain dollar amount discount or you know percent discount okay now so we have to set up where we want this account to go now I'm going to show this as a offset cost of goods sold in your case it could be an offset offset to some other expense if you don't have cost to get sold so for example I'm in the service business I don't necessarily have cost to get sold and so this if there was an early paid discount I would put it against whatever expense this was all right all right so let's set up this account and we're going to say that let's see there is a less discounts taken I'm going to set up a new account and we're going to call this cost goods sold so I'm going to right click here I'm going to say new I'm going to call this a cost of goods sold account I'm going to continue and you know I'm not going to put in a number but of course if you have a number in system you put in a number I'm going to say discounts taken and you can call this whatever you want to so you know if it's early pay discounts or whatever the case may be just what you know whatever signifies what you're going to remember I'm going to make this a let's see sub account of job expenses and I'm going to hit save and close all right so you'll see here discounts taken now I'm going to move this down if it'll let me move it down here to under discounts taken okay so now the next thing is what we want to do is let's go enter a sample bill so if we say vendor spent and I'm going to make up a bill and I'm going to do two examples here so I'm going to say city of Bayshore date 12 15 and let's say I'm out due is 215.23 due date 12 30. now let's say that city of Bayshore said you get a 2 percent 10 that 30 which means it's due in 30 days but if you pay within 10 you get a 2 discount so I'm going to change the terms and let's just say you can set up any terms you want but let's just say they say if you pay within 30 or 10 days you get a 2 discount so I'm going to put this to a random account we're going to say that this is related to cost of goods sold we're going to say permits and licenses okay 215 23. so at this point when you're entering the bill you don't enter any discount okay unless for some reason they send you a bill that has a discount on it already but normally you're not going to see that so we're going to say job expenses 215 23. so I hit save and close and then I'm going to go over and I'm going to say vendors pay bills we'll go to pay bills and we're going to see city of Bayshore okay there's one that's not our bill 215 23 right here so if I go in this is within the 10 days and I click on this and say okay I'm going to pay this look down here where it says discounts okay set discount QuickBooks will automatically you know track if you're paying this within 10 days it'll calculate what that two percent discount is it'll say this is your suggested discount four dollars and 30 cents so if you are using this function in QuickBooks and you have set up terms where you say okay we're going to do a 2 10.30 because the vendor gave you those terms you're going to use this method so we're going to say set discount let me bring this over here from this other screen and you're going to see okay discounts and credits it's the same little pop-up box if there were credits over here they would show up but we have a discount we say I'm out of discount four dollars and thirty cents and you have to specify the discount account so this is why we went in and we said let's uh set up a discount account so this job expenses I put it to the account discounts taken that we set up we'll say a class we'll say that's remodel so if you're if you're using class track and you can specify but you don't have to use a class so we're going to say done and you're going to see here where it says okay the amount due is 215.23 suggested discount discount discount used 4.30 so the amount to pay is 210.93 so that is the simplest way to use discounts that vendors give you in QuickBooks so in this case we would say pay selective bills it's going to clear this out of there okay so what a lot of people do is just say okay well it's 215 23 I'm just going to type in the amount to pay well the problem with that is it leaves a small balance of 4.30 as due to the city of Bayshore so you're going to leave this just hanging out there and you want to make sure that you clear it out this is the simplest way to do that okay so we're going to pay these selected bills let me hit okay all right so now what we're going to do is I'm going to show you if you enter a bills let's say vendors enter bills and again we'll pick somebody city of East Bay Shore we're going to say this is 525 okay and we're going to put this to an account we're going to say this is some cost to get sold permits and licenses and no customer job no class so we're going to stay safe okay so we entered this bill now let's say that for some reason they call and they say look you know what we're going to give you a 25 discount if you come in if you pay this in the next couple days okay so what we're going to do is we're going to vendors and we are going to pay bills okay and when we go to let's see city of where was this let's make sure that we capture this 525 city of East Bayshore okay so I click this off and you'll see down here it says set discount there is no discount but let's say it brings up this box and we say Okay terms doing the receipt amount of discount 25 type that in we'll say job expenses discounts taken click done and you'll see now 525 original amount due discount used amount to pay so again in this case all you need to do is go into pay bills click on this set discount enter the discount that you're taking and QuickBooks will automatically track so it's going to put this discount to that cost goods sold discounts taken and it's still recording the original amount due so if I say pay selected bills and I say okay and we let's see let me pull up the profit and loss so I can show you exactly what this is doing so if we go to profit and loss you'll see here that we have discounts taken 25 and 4.30 all right so let me go back to the profit and loss to show you so it's recording permits and licenses if I go here you're going to see the full amount 525 and 215 23. and then the discount right below it so this is a great way to track the discounts separate from a full amount of the bills all right any questions any comments please feel free to leave those below I try to answer just about every comment that I get on these YouTube videos also check out the master class at qbuniversity.org