This is the area that causes the most confusion for QuickBooks Online users. First, let’s take a look at the definition of each …
Bill: This is an invoice you receive from someone you do business with; basically, they have allowed you to pay on credit. Utility companies would be an example.
Expense: This is any transaction that lowers your bank account, or increases what you owe on a credit card. The amount owed had already been paid.
Check: This is a payment for an expense using a paper check.
Bill Payment: This is a payment against a Bill that you entered in QBO.
If you enter a Bill, then pay it by a Check or Expense, QBO still shows that the Bill is due. Any Bill you enter must have a corresponding Bill Payment in order to show it is paid. If you enter a Bill Payment, and there is no Bill, QBO will show an overpayment.
Best practices are as follows:
- If you receive an invoice, enter it as a Bill.
- When you pay the invoice, enter it as a Bill Payment.
- If you are going to write a paper check, enter is as a Check.
- Everything else should be entered as an Expense.
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