Bills Tracking in Bookkeeping Software

In bookkeeping there is a system to keep track of bills that are owed by your company. This is called Accounts Payable. It’s easy to remember what it means if you think about the word Payable means that you owe it to someone else. Each bill is entered into the system and you will assign an expense account for it. This puts the bill in the Accounts Payable section and if you pull up an Accounts Payable report, it will show you a listing of all unpaid bills. Once a bill has been paid, it drops off this report. You will see the date of the bill, how old it is in days, the amount, who it is owed to and the due date.

When you pay the bill by using the Pay Bills function, you will need to decide whether to print a check or not. If already paid online, then no check needs to be printed. You only need to print a check if you are mailing it out in snail mail. You will enter the date of the payment and the amount or you can simply check the box of the bill that you wish to pay. Checking the box will pay the bill in full. If you wish to pay less than the full amount, you would not check the box and instead fill in the amount in the amount field. Then save it. If you pull up another Accounts Payable report, you will notice that the bill you just paid is no longer listed there. It has not disappeared from your accounting records, it just isn’t on the AP report anymore because it has been paid. So any time you look at the AP report, you will know those are all unpaid bills. You do have to use the Pay Bills function and not simply write a check. If you write a check to pay a bill, it will not be erased from the AP report, you see. Conversely, if you try to pay a bill with the Pay Bills function that you did not enter in the Bill section, it won’t be listed and available to pay.

There will be times when you don’t want or need to do all of that to simply pay for something. Say you went to Office Depot and used a company check to pay for office supplies. In that case, you would use the Write Check function and enter the details of the check you wrote and enter it to Office Supplies expense. Add the check number and do not print it. There is no need to enter and pay a Bill in the system.

As you can see, when you want to pay bills, you can pull up the AP report and plan which bills to pay and when. Keep in mind, you want to establish good credit for your company so that you can borrow funds down the road, so keep the bills paid on time. I pay bills on a set day of the week, every week and I pay all the bills that are owed at that time. Some companies like to mail physical checks and others will allow you to pay their bills online. It’s important to remember, to duplicate in the books whatever you do out in the world. Paying bills online has no effect on your books until you enter it into the books. You will need to decide whether to pay bills online or with paper checks, it’s up to you and whether to pay all of them or just some with a particular method. These days the postal service is quite unreliable and slow, so if you can, pay bills online.

You will get statements in the mail or emailed to you. You should compare what is shown on the statements with your books. Make sure that the same charges and payments shown on the statement are also in your books. When you get a statement there is no need to enter anything from it in your books, because you should have already entered your bills at the time you received them. With one exception, if there are any new charges on the statement such as a finance charge, then you would need to enter that one charge. You do not need to do a reconcile procedure in the books, just a visual comparison is fine.

What you will do is enter your bills in the bookkeeping software and use the information on the bill to do so. Each company that you owe is a Vendor and you will need to set up each Vendor under the Vendor section. You can do this as the bills come in and is actually easier than trying to set them all up at once. You will need information from the bill to do so. Once you have the Vendor set up, you can simply choose the Vendor to enter more bills in the future. There are a lot of fields where you can enter information and you should be able to find most of the information on the actual bill and I advise you to enter as much as you can. That will save you time later. Be sure to enter the address where the payment is to be mailed to so that it will print out on your checks. Also your account number is important because that is needed by the vendor in order to process your payment to them. Some bookkeeping software needs to know who the check is made out to and has a separate field for that information. You can also choose a default Expense account and that can help prevent errors and being inconsistent. You can always override that choice when you need to, but it will prefill every time for you when you enter a bill.

This whole system works best if you are consistent in how you do it. If you get an invoice for your office rent each month, then enter it as a bill each month and pay it with bill pay. Don’t just write a check sometimes, or forget to enter the bill sometimes. Do it the same way every time. Don’t forget the dates are very important, it affects when the figures show up on your financial reports. For instance, you want the rent expense to show up only once per month and that will happen if you use the date from the invoice that you received.

When you pay a bill using a paper check, I would copy the check and attach it to the paper bill. You may need to tear off a stub from the bill to mail with your check. Always leave one stub on the check and fold it so that it fits in the envelope with the address showing in the envelope window. This is because the stub will show a listing of the bills that you are paying which helps the vendor process your payment.

When you pay a bill online whether in their website or with your online banking, I would note that on the paper bill. I usually write the date and Ach or Eft and circle the amount that I paid. If I paid several bills at once, staple them together and mark the top bill with the total amount and circle it. If you pay by credit card, be sure to note that on the paper bill and which credit card, too.

Every bill you receive may not have an invoice number on it. Always enter the invoice number when you enter the bill, this is how you will know if you have a duplicate bill, because the software will alert you. And this will show up on your check voucher so the vendor knows which bills you are paying to be able to process your payment correctly. If there is no invoice number, then I want you to follow this naming convention-if the issue date of the bill is June 25, 2023 then for the invoice number field you would enter Jun 23. Do that the same way every time there isn’t an invoice number on the bill. That helps to keep yourself straight.

You will see when you look at a Vendor tab a list of bills and payments there, that all the invoice and check numbers are shown. That is how you can locate a particular bill or payment. And you will be able to see if there is only one per month. You will be out of luck doing that if you don’t enter an invoice number or use the naming convention above.

Don’t create too many Expense accounts every time you can’t figure out where a transaction should go. It only makes it harder for you in the long run. Almost any expense you have will be in the list of expense accounts you created when you set up the company chart of accounts. Only create new ones if you really think you want to track that expense separately from other expenses. If you have ever seen a Schedule C for a 1040 tax return, you will see they don’t have many expense categories, maybe 20. Those are the only ones you need. I have that Schedule C in the Resources category so you can see it.

Same thing with Vendors. Don’t create a Vendor account for every place you purchase something. Some of them do not need to be tracked, such as restaurants, gas stations and convenience stores. Set up one vendor for each of those and put all meals under restaurants, all fuel under gas station, etc. You are not going to need to know which restaurant or gas station, ever, I promise.

I will cover credit cards in the Credit Card Accounts in Bookkeeping Software section. And loans in the Loan Accounts in Bookkeeping Software section.