From time to time, firms will receive credits and refunds from their vendors. Centerbase uses negative vendor bills, vendor bill refunds and vendor bill credits to process these credits and refunds. This article will go over how to process vendor credits and refunds, depending on whether it is for an unpaid vendor bill or one that has already been paid, and whether the expense(s) on the vendor bill are firm expenses or matter expenses.
NEGATIVE VENDOR BILLS
Centerbase users have the ability to create negative vendor bills. This action should be utilized when a vendor has issued a refund check or issued a credit toward one or more of its invoices. Negative vendor bills should be used for any vendor bills that contain expenses that have been billed back to a matter.
Prior to adding a negative vendor bill, a best practice is to open and view the vendor bill which is being credited or refunded to ensure the correct matter(s) and/or expense account(s) are being credited.
Negative vendor bills are created in the same manner as regular vendor bill, with the exception that the line items are entered as negative amounts. A negative vendor bill can be issued for all or any portion of the original vendor bill.
When the vendor bill being credited has already been paid, Centerbase has recorded the payment as follows:
When a negative vendor bill is entered, Centerbase reverses the matter and firm expenses according to the amount being credited, and debits the asset account, Vendor Bill Overpayments:
When a negative vendor bill has been created which effects a matter expense, a negative billing entry will also be added to the matter affected so the matter will receive proper credit:
If the vendor bill being credited has not yet been paid, then no general ledger entries have been recorded. Similarly, no general ledger entries are made when the negative vendor bill has been entered, but the matter affected will still receive proper credit through a negative billing entry.
If the negative vendor bill is recording a vendor credit for a vendor bill that has already been paid, the amount credited will remain in Vendor Bill Overpayments and available to use towards other bills received by the same vendor.
APPLYING VENDOR CREDITS
After a negative vendor bill for a credit has been created, the vendor credit will need to be applied to an open vendor bill. (For vendor refunds, please see the section on Vendor Bill Refunds below). Go to the bill being credited and from Vendor Bill Actions, choose Apply Credits.
The vendor’s bills that have open balances, will be listed. Click on Apply to the right of the bill to which the credit will be applied. Choose the credit that will be used and the amount to be applied (up to the amount available), then save and close the current window as well as the Add Credit window.
Centerbase will credit Vendor Bill Overpayments and add general ledger entries to record the expenses paid by the credit.
VENDOR BILL REFUNDS
If a negative vendor bill is recording a vendor refund, i.e. a check or other form of payment is received, the process is slightly different.
When a vendor issues a refund by check or another form of payment, a deposit will need to be processed through Vendor Bill Refunds. After the negative vendor bill for the refund has been entered, a Vendor Bill Refund will need to be added:
The vendor from whom the refund was received should be chosen from the vendor drop down list and the date the deposit will take place, added. The Type is the form of payment received, i.e. check, credit card or other. Choose the bank account to which the payment will be deposited (Note – unlike other deposits, in this circumstance, do not use undeposited funds). Choose the appropriate negative vendor bill and the amount refunded will populate. Save and close.
Centerbase will record this transaction by reducing Vendor Bill Overpayments and adding the amount as a deposit to the bank account:
Now a vendor credit will need to be added to apply to the vendor bill. On the vendor bill, go to Vendor Bill Actions, then Add Credit.
Enter the amount of the refund and choose the vendor bill to which the refund should be applied.
Save and close. Now the vendor bill will show the credit (refund) and the adjusted balance due.
VENDOR BILL CREDITS
Note: Vendor Bill Credits should be used for credits to vendor bills that only contain firm expenses. If used on a vendor bill that contains a matter expense, the matter will not receive the credit unless a manual negative billing entry is added to the matter(s) affected.
When a credit is received from a vendor for only firm-related expenses, the process is much simpler. No negative vendor bill will need to be created. A Vendor Bill Credit will need to be added to the affected bill instead.
The vendor from whom the credit was received should be chosen from the vendor drop down list, the date and the amount of the credit entered. The credit can be applied to the open vendor bills listed for the vendor or if no vendor bill is checked, the credit can be applied to the vendor for use at a later time.
Please reach out to firstname.lastname@example.org if you have any questions or want further information regarding negative vendor bills, vendor bill refunds or vendor credits.