One area of #QuickBooksDesktop that causes some confusion is the Customer and Vendor centers. As simple as the concept of a Customer and Vendor is, it quickly becomes more complicated as users try to layer on additional needs. This is particularly confusing for non-profit entities as they try to wrap the concept of Donors and Grantees around the Customer and Vendor framework in QuickBooks. This relationship can work, but the user should go into it understanding that there are limitations and that we are stretching the concept a bit to fit our needs. What does QuickBooks consider a Customer or Vendor to be? I wasn't in the initial meetings as the original concept of a Customer and Vendor were integrated into the software, but it seems they were designed with some pretty basic concepts in mind: Customer = Someone that owes and pays us money Vendor = Someone we owe and pay money to The Customer and Vendor centers are designed to manage the AR and AP portion of those basic concepts. It's a great place to track contacts, notes, addresses, and some of the other "soft" data but when it comes to transactions, the Vendor and Customer Centers are trying to answer one real question, "how much do we owe them?" or "how much to they owe us?" So, if you want information on anything beyond that simple question, you will likely need to look outside those Centers for an answer. With this in mind, the basic transactions that show up in the Customer and Vendor centers are the ones directly related to those functions. For Customers, that means Invoices, Credits Memos, and Payments and for Vendors: Checks, Bills, Bill Credits, and Bill Payments. Let's consider the non-profit entity's relationship with a Grantee (an entity or individual that they will be giving or granting money, goods, or services to). These same considerations apply to the Donor/Customer question but for simplicity I'm going to focus on Grantees. The Grantee does fit the basic idea of a vendor, we will be paying them money but we don't necessarily owe them. Also, some grants may not be monetary at all, instead we may give them goods or services. Vendors in QuickBooks were not designed with these considerations in mind and when we attempt to apply these concepts to Vendors, we will need to stretch the QuickBooks concept a bit to fit our needs. We may also be disappointed in the transactions portion of the Vendor center overall because we are expecting it to answer natural questions that we have related to Grantees but again, the Vendor center only focuses on one question: "what do we owe them?" Time to dig in a bit and talk about transactions. It is convenient to get all transactions related to a particular Grantee listed in the transaction list of the Vendor Center. The easiest way to accomplish this is to only use transaction types that the Vendor Center naturally recognizes, Checks, Bills, Bill Credits, and Bill Payments. This can be done, but it does create more transactions than technically needed. Here's some transaction examples:
Cash Payment to Grantee: These transactions fit nicely in the Vendor concept. Bills can be used to keep track of approved unconditional grants that haven't been paid yet or payments can be directly entered through a Check (without a related Bill). Both of these transactions will show up in the Vendor Center as long as "Show: All Transactions" is selected. Goods or Services to Grantee: For these transactions, I'm going to assume the goods are already recorded and in some kind of inventory account. Step 1: Create a bill for the Grantee and in the details add an expense line that goes to your "Non Cash Grants" or similar expense account. This transaction debits your expense account and credits Accounts Payable. So right now the goods are still in inventory and the AP account holds the liability.
Step 2: Create a bill credit in the same amount and add an expense line that goes to your inventory account, Save and Close. This transaction debits Accounts Payable and credits Inventory. Now all the GL accounts are square, the goods have been moved to AP, then from AP to the Expense; however, the credit that we created still needs to be applied to the bill so both have a zero balance. Step 3: go into the "pay bill" option and apply the credit that we just created to the outstanding bill. Considering those three steps, the same thing can be accomplished in a single Journal Entry. Journal Entries are outside the list of transactions that naturally show up in the Vendor Center, but if you complete it in a specific way we can make sure it does.
To record the same transaction through a Journal Entry, enter a debit to the "Non Cash Grants" or similar expense account and enter a credit to your inventory account. This Journal Entry skips the AP account entirely which is not needed, there is no liability that needs tracked. To make sure the Journal Entry shows up in the Vendor center, you need to enter the Vendor name in the "Name" field of the first line of the Journal Entry (make sure the 'Billable?' field is not selected). I actually recommend it be included in all lines related to that vendor but the Vendor center only includes Journal Entries in the transaction list where that vendor is in the first line. This also means that while you could create a Journal Entry that records donations for multiple Grantees, you would not want to do this because the Journal Entry would only show up in the Vendor Center for the one Grantee that is listed on the first line.
QuickBooks Desktop is a great accounting system for charitable organizations, sometimes it just takes a bit to find the best way to recognize some unique transactions.