Properly Designate Your Payee's in QB
An often under utilized aspect of the Quickbook's register is the payee field. Labeling transactions according to the payee has residual benefits in addition to creating more detailed books, Quickbooks software will recognize previously used payees and automatically fill in transaction information according to the payee name when importing transactions from a bank account.
When creating a payee, however, it is extremely important that a payee is designated correctly. There are three categories that a payee can be designated as: vendor, employee or other name. Designating a payee incorrectly as a vendor can throw off an Accounts Payable balance and the true business equity figures as well, so use the following descriptions as guidelines for coding payees:
*Employees, self explanatory, are the people you employ. Be aware though that a payee who did work on a temporary basis, i.e. any non W-2 worker, should not be labeled as an employee name.
*Other names include any and all payees that were compensated for an incidental transaction. This includes restaurants, gas stations, retail stores, temporary laborers, outside and professional service providers, and distributors who do not sell to your business on credit.
*Vendors need to be considered only those payees who extend materials to your company on credit for the purposes of resale. This is very important to keep straight, if a payee is labeled as a vendor in Quickbooks, the software assumes that the relationship that payee has to your company is that of a supplier, and every transaction associated with that vendor payee will affect a credit balance. In other words, if McDonald's is labeled as a vendor in your Quickbooks file, every time you enter or import a purchase at McDonald's the software will treat this as you paying in advance for yet to be billed for and received goods. Which means your balance sheet will falsely show your company with an incorrect Accounts Payable balance because it will factor in a false credit balance you have with McDonald's. Remember, vendors are only entities that issue your company a bill for goods that they supply to you in anticipation of your company paying back that credit issued to you within an agreed upon time frame. Unless this describes the relationship you have with your payee, they are not a vendor.
Accounting Joke of the week:
An accountant visited the Natural History museum. While standing near
the dinosaur he said to his neighbor: “This dinosaur is two billion
years and ten months old”. “Where did you get this exact information?”
“I was here ten months ago, and the guide told me that the dinosaur is
two billion years old.”
06/09/2010
