How to Apply Vendor Credit in QuickBooks Online?

This article will walk you through steps to apply vendor credit in QuickBooks online.

Vendor credit occurs when a vendor fails to pay money for the services/ goods you provided to him. In easy words, vendor credits equals to the amount that particular vendor has to pay you in near future.

QuickBooks accounting software helps you to keep track of vendor credit, refund checks from vendors and much more in your virtual books of accounts to make your accounting tasks simple and hassle-free.

What are Vendor Credits in QuickBooks?

Vendor credit in QuickBooks Online is used to either record refunds from vendors (refund checks) or returns to vendors. Vendor credits are equivalent to the amount that a vendor owes you. Vendor credits enable you to track this pending amount until the vendor pays, refunds, or applies that amount to other bills in his books of accounts.

Create Vendor Credit in QuickBooks

Accounts payable is a transaction in QuickBooks that records the money you owe your vendors for products or services you’ve purchased. It’s also known as a bill. And if you return a product or ask for a service credit, it’s called a vendor credit.

Kindly do not confuse credit memos with vendor credit.

The Plan to Pay Later feature makes sure the credit amount is added to the expense account you are using for this vendor in QuickBooks.

How to Create Vendor Credit in QuickBooks?

Follow the below-mentioned steps to create vendor credit in your QuickBooks account –

1. Click on “+ new” on the top left corner of your page.

2. Next, click “Vendor Credit” or select “Receive Vendor Credit.”

3. A vendor dropdown list will appear on your screen. There select your respective vendor.

4. Enter the item details or category details. This would be the service, product, or category you’re getting the credit for.

5. Click on the Save button to finalize your progress.

6. Finally, click the Close button to end this task.

Great! You are now a pro at creating Vendor Credit. You can try it with your own QuickBooks ledgers. 

How to Apply Vendor Credits to a Bill in QuickBooks?

Apply vendor credit to any open or future bill. Follow the steps given below to enter bills and track your expense –

1. Click on “+ new” on the top left corner of your page.

2. From the dropdown box appearing on your screen, click on Pay bill/s.

3. Choose a bill that you want for the vendor. You will notice the credit available with that particular vendor in the Credit Applied field.

4. Finish the remaining fields as given in the “Create Vendor Credit in QuickBooks” steps above. 

Amazing! You now know how to apply vendor credits to a bill in QuickBooks. You can put your knowledge to the test!

Handle Vendor Refunds on QuickBooks Online

You can track your account balance and credits using Accounts Payable. To track credits for your vendors, you should consider entering bills in QuickBooks. Otherwise, you can enter a note to remind yourself about this credit in the future.

Things to remember –

• If the vendor credits are absent, your screen will prompt “Not available.”
• Starting from August 18, 2017, vendor credits are fully acknowledged. (Note: All the incoming bills page generated & vendor credits within QuickBooks are qualified to be handed down towards bills on the Pay Bills Online website).
• Your screen will prompt an error if the available vendor credits are less than the amount entered.
• Voiding a payment transaction won’t delete or undo the vendor credit.
• Vendor Credits cannot be deleted or unapplied once applied.

FAQs on QuickBooks Vendor Credit

Q.1 How to Delete Vendor Credit in QuickBooks Online?

Answer: To delete vendor credit in Quickbooks, open the Expense menu and the Vendors tab. Now, select the name of the vendor you want to make changes to. Next, Under Transaction List, select the credit. Click on the check box beside it. Under the Action column, click the arrow beside View/Edit. From the dropdown box click on the Delete option. At last, click yes to confirm.

Q.2 How do I Apply Vendor Credit to a Customer Invoice in QuickBooks Online?

Answer: To apply vendor credit to a customer invoice, go to the Customer menu, and then click on Receive Payments. Next, select the invoice you want the credits to be added to. Now, select Set Credits and click on the credits to apply. Click on Done. Then, click on Save and close the window.

Q.3 How do I Record a Refund from a Vendor in QuickBooks Online?

Answer: To record vendor refund go to the Vendors menu on your panel, then click on Enter Bills. Click on the Credit radio button. Then in the Vendor department on the panel, choose the vendor who deposited the refund. Now, in the Credit Amount field, add the refund amount.

Q.4 Vendor Credit Vs Credit Memo in QuickBooks – What is the Difference?

Answer: Credit memos and vendor credit are two different types of transactions. A credit memo is used when a customer makes an advance payment for a transaction. On the other hand, a vendor credit is used to track and record refunds or credits issued to the owner by the vendor or supplier.

Wrapping it Up

Great! Now you have learned how to apply vendor credit on QuickBooks.

Virtual bookkeeping offered by QuickBooks has made the life of small business owners and bookkeepers easier and simpler.

They can now handle their finances without having to depend on anyone or use their finances to hire an accountant; the chances of errors are very low here compared to manual methods; the best part is business owners get more time to grow and build their dream.