Received a credit or refund from a vendor, but not sure what to do now? Centerbase uses negative vendor bills, vendor bill refunds, and vendor bill credits to process credits and refunds. This article covers how to process vendor credits and refunds, depending on if it's unpaid or not, and whether the expense(s) on the vendor bill are firm or matter expenses. Let's go step by step and add in some accounting commentary!
Here are the five categories you could fall into:
- Vendor bill is PAID and has MATTER expenses: go to Section 1.
- Vendor bill is UNPAID and has UNPAID MATTER expenses: go to Section 2.
- Vendor bill is UNPAID and has PAID MATTER expenses: go to Section 3.
- Vendor bill is PAID and has FIRM expenses: go to Section 4.
- Vendor bill is UNPAID and has FIRM expenses: it's as simple as just deleting the vendor bill!
- Vendor issued a CREDIT: go to Section 5.
1. NEGATIVE VENDOR BILL
Has a client paid your firm to pay a vendor bill? You need to follow the process below by creating a negative Vendor Bill and a Vendor Bill Refund. This will move the money from Vendor Overpayments to the desired account to refund the client. From there, you will need to issue a refund withdrawing from the desired account, and apply it to the matter originally used for the client.
You'll want to create negative vendor bills when a vendor has issued a refund check or issued a credit towards one or more of its invoices. Negative vendor bills should be used for any vendor bills that contain expenses billed back to a matter/client.
Negative vendor bills are created the same way as regular vendor bills except line items are entered as negative amounts. A negative vendor bill can be issued for all or any portion of the original vendor bill.
Before you start, double-check the vendor bill that's being credited or refunded has the correct matter(s) and/or expense account(s) to be credited. This will save you unnecessary heartache.
When a negative vendor bill that affects a matter expense is created, a negative billing entry is added to the matter being affected. This makes sure the matter receives proper credit:
Accounting Side Effects:
When the vendor bill being credited was already paid, Centerbase recorded the payment as follows (The following screenshots can be found in the System Settings under System Health>T Accounts):
Now when the negative vendor bill is entered, Centerbase reverses the matter and firm expenses according to the amount being credited. And the asset account Vendor Bill Overpayments is debited:
Since the vendor bill being credited has already been paid, the amount credited will remain in Vendor Bill Overpayments and be available to use towards other bills received by the same vendor.
VENDOR BILL REFUND
After the negative vendor bill for the refund is 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. Then add the date the deposit will take place. 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.
This will move the money from Vendor Overpayments to the desired account to refund the client. From there, you will need to issue a refund withdrawing from the desired account, and apply it to the matter originally used for the client.
Accounting Side Effects:
Centerbase will record this transaction by reducing Vendor Bill Overpayments and adding the amount as a deposit to the bank account:
2. VENDOR BILL DELETION
Do you have an unpaid vendor bill with matter expenses? You'll need to unpost the matter bill it's associated with, delete the billing entry, and then delete the vendor bill.
First, unpost the Matter Bill associated with Vendor Bill.
Select Edit.
Delete the line entry using the red X.
Now go to the Vendor Bill, and delete it. And you're done!
3. VENDOR CREDIT
Scenario: You have created a vendor bill but not paid it and you have billed the client that expense and received payment for it. The client has also paid the vendor separately, so the they need to be credited and the vendor bill needs to be zeroed out.
Start by creating a negative vendor bill as in section 1 but instead of creating a vendor bill refund, go to the negative vendor bill, click Vendor Bill Actions and select Apply Credits. That will bring up a list of available bills.
Click Apply on the right-hand side and select the amount for the negative bill.
That will cancel out the vendor bill and create a negative expense for the client.
4. VENDOR REFUND
Scenario: Have a paid vendor bill with firm expenses you've been refunded by the vendor? Here's how to record that.
When a vendor issues a refund by check or another type of payment, a deposit needs to be processed through Vendor Bill Refunds. A negative vendor bill will need to be generated prior to processing a Vendor Bill Refund.
The vendor from whom the refund was received should be chosen from the vendor drop-down list. Then add the date the deposit will take place. 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.
Accounting Side Effects:
Centerbase will record this transaction by reducing Vendor Bill Overpayments and adding the amount as a deposit to the bank account:
5. VENDOR BILL CREDITS
Note: Vendor Bill Credits should be used for 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 simple. No negative vendor bill is needed, just a vendor bill credit.
The vendor from whom the credit was received should be chosen from the vendor drop-down list, then add 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.
Drop us a line at support@centerbase.com if you have questions or want to dive deeper into negative vendor bills, vendor bill refunds, or vendor credits. As always, happy crediting and refunding!
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