Paying From A Purchase Order In Quickbooks

Sometimes companies will create a purchase order in Quickbooks and pay for the items they ordered BEFORE they actually receive the items or receive the invoice.  Why would someone do this?

Well, it could be a custom order that requires prepayment, or it could be a small manufacturer that requires payment up front.  Or, you could have an opportunity to get a discount if you pay within a certain amount of time.

Whatever the case, recording this in Quickbooks can be a challenge.

Here are the steps to pull it off:

1. Create your purchase order like normal
2. Then create a new "Other Current Asset" account called "Prepaid Inventory" or something similar
3. Pay for your items with by writing a check or entering a credit card charge, whichever way you pay.  QB will mention that you have an open purchase order for the vendor, make sure to click No to not select the purchase order.
4. On the Expenses tab of the check or credit card charge, click the Account field. Choose the other current asset account that you created.
5. Save the check or credit card transaction.

Then, when you receive the items:

1. Find the check you wrote or the credit card charge you entered and bring it up on the screen.
2. On the Expenses tab, select the line that contains your other current asset account.
3. Go to the Edit menu and click Delete Line.
4. Click the Items tab.
5. Click Select PO.
6. Click the purchase order that contains the items you paid for and then click OK.
7. If necessary, record additional expenses (such as shipping) on a new credit card charge or check.
8. Don't add additional expenses to the existing credit card charge or check.
9. Save the transaction.

And that's all there is to it!  I hope this helps and let me know if you have any questions!

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