Third Party Billing

Scenario:  Customer has, for example, warranty work done.  An invoice for the work is created, in the customer’s name, and left of the customer’s account.  A copy of the invoice is sent to the vendor who provided the item.  The vendor then issues a credit for the amount of the warranty work done (using your invoice amount for the credit issued).  The problem is how to zero out the customer’s account, but retain the history and amounts, and enter the credit on the vendor’s record.

During the original transactions, the following occurred (very simply):

Item bought from vendor -  Debit to Inventory; Credit to AP

Warranty work done for the customer - Debit to AR & Cost of Goods – if inventory was used; Credit to Sales & Inventory – if inventory was used.

Accounts Receivable:

Go to:

• Accounts Receivable (Module 2)
  • Cash Receipts Entry & Editing (Task 2)
    • Enter a New Cash Record (Sub-task 1)
      • Step 1.  Enter a new record as if a cash payment was received from the customer for the amount of the invoice (if multiple invoices are being cleared up, enter the total amount of all the invoices).  The important fields are listed below:
        • Field 2              Trx Type 1 (Cash Sale).
        • Field 3              Enter the customer number
        • Field 9              Enter the amount of one (or multiple) invoices
        • On the second screen, enter the invoice(s) numbers of the invoices being "paid”.

      • Step 2. Enter another new record in Cash Receipts Entry & Editing (Task 2, Sub-task 1 in AR).  The important fields are listed below:

        • Field 2              Trx Type 1

        • Field 3              Enter the customer number

        • Field 14        Enter the GL account number that can be used to track the transactions. i.e. “over/short” GL account Note: remember this GL account number, it will also be used on the AP side.

        • Field 15            Enter the amount of the “payment” as a negative amount (which will be the same amount that was entered in field 9 of Step 1).

Overall effect:

First record:               a debit (increase) to cash and a credit (decrease) to AR were made

Second record:             a debit (increase) to the selected GL account and a credit (decrease) to cash were made. 

Therefore, a "wash" to the cash account, a decrease in AR to clear the customer's

account and an increase to the selected GL account – once posted.

Accounts Payable:

Go to:

• Accounts Payable (Module 3)
  • Voucher Entry & Editing (Task 1)
    • Enter  (ADD) New Transaction (Sub-task 1)
      • Enter the credit from the vendor (the amount should be the amount of the transactions posted to AR from above).  The important fields are:
        • Field 2              Use the AR invoice number or Customer number as a reference
        • Field 4              Enter the amount, be sure it is entered as a negative amount
        • Field 12        Enter the same GL account number used in Step 2, field 14 from the AR section above.  Remember to enter the amount as a negative.

Overall effect:

A debit  to AP and a credit to the selected GL account.

Therefore a “wash” to the selected GL account and a decrease to AP to reduce the liability owed to the vendor – once posted.