With QuickBooks Desktop and Bill.com, Purchase Orders (PO) are managed in QuickBooks. To pay the bill for a PO in Bill.com, follow the steps below to ensure your workflow process is correctly managed.

Setup

1. Create an Other Asset account named “PO Clearing”
2. Create an Other Charge Item named “PO Clearing” tied to the “PO Clearing” Other Asset Account to use for all your POs

Workflow

1. In QuickBooks Desktop, create the PO
   • The PO itself is created in QuickBooks Desktop and sent to the vendor to fulfill the inventory order
   • A debit posts to the items recorded in QuickBooks Desktop for the price paid (total amount equals the item receipt)
     
2. When the inventory items from the PO arrives, create an item receipt in QuickBooks
3. Zero out the receipt by adding a credit for the PO Clearing charge item as a reverse amount for the total
   • Vendors send an invoice for shipped goods with the PO slip
   • This second half of a PO is the "item receipt", it acts as an Invoice to be paid by the recipient upon receipt of the inventory items
   • Zeroing out the receipt will Debit the Inventory Asset, and Credit the PO Clearing charge item
4. Send the receipt to your Bill.com account Inbox
5. In Bill.com, enter the receipt as a bill
6. Enter the total amount of the receipt to your PO Clearing charge item
   • The item receipt is sent to Bill.com as a bill for the amount of the zero'd out Item Receipt
   • The PO Clearing charge item is used as the expense account and when paid as normal, the Inventory debits and credits match against the Purchase Order Debits and Credits, allowing for reconciliation for the item cost
     • This will result in a Credit to your Accounts Payable, and Debit to PO Clearing other charge item

How it works

A Purchase Order is a statement for intent to buy, prior to actual purchase.

• This type of contract authorizes an order from the vendor, before the vendor has received or charged the client for the order
• The expense of the payable bill can be recognized as an account payable upon receipt of said inventory
• Inventory quantities can also be recognized upon receipt of the invoice to account for the total items received, and total cost of purchase
• On the balance sheet, items from POs appear as inventory, and payable bills for items appear as liabilities

Things to know

Customers using Purchase Orders and job costing: This workaround won't work for the Jobs Estimates vs. Actuals Details report in QuickBooks Desktop. The report will only show the PO clearing item created in this workaround instead of the item that would be listed on Item Receipts used to receive inventory.