QuickBooks Tips & Tricks

Use Credit Memos & Bill Credits Rather than Customer & Vendor Discounts

Customer Discounts (applied on the Receive Payments window) and Vendor Discounts (applied on the Pay Bills window) are efficient ways to discount what your customers owe you and what you owe to your vendors. With vendors, the discounts are even more effective when you use date‐driven terms because QuickBooks will either automatically apply the discount or automatically calculate the discount, depending on the settings in your Company‐level preferences.

However, it is almost always best to use a Credit Memos and Bill Credits instead of Customer Discounts and Vendor Credits (respectively) for the following reasons.

Customer and Vendor Discounts do not Allow You to Select an Item or Sales Tax Item.

Since you cannot use an Item on discounts, QuickBooks will not reflect the discount on Item‐based reports like Sales by Item Summary and Job Profitability Summary/Detail.

You also cannot designate a sales tax item, so QuickBooks will also exclude customer discounts (which are reductions in income) on sales tax reports like the Sales Tax Revenue Summary report and the Sales Tax Liability report. However, if you use a Credit Memo or Bill Credit, you can either create a separate Item to track the discount. or, you can use regular Sales Items, so the discount will be reflected in the overall profitability for those Items. You can also make the adjustment gross or net of sales tax. If you specify that the line is taxable on the Credit Memo, QuickBooks tracks the discount by the stated Sales Tax Item in the Tax field.

Vendor Discounts do not Allow You to Designate a Customer or Job Name.

If you use job costing reports like the Profit & Loss by Job, discounts taken (which is usually a Cost of Goods Sold type account) will not show on the report because the discount is not assigned to a customer or job record. However, if you use a Bill Credit, you can designate one or more jobs for the discount.

Users Can Miss Date Driven Discounts.

The auto‐application of discounts on Bills that are based on date‐driven terms requires extreme accuracy of data entry and bill payment processes. For example, the terms of 2% 10, Net 30 means your client can take a 2% discount if they pay within 10 days. And, you can set QuickBooks to automatically apply this discount within that 10 day period to maximize cost savings.

However, data entry errors on the date of the Bill and/or the date of the Bill Payment can cost the company thousands of dollars in unused Discounts, especially if the user is not double checking for entry errors (for Bill and Bill Payment dates) and manually overriding as necessary.

By contrast, Bill Credits are not date‐sensitive and will always apply to the Bill if you set up this auto application in Company Preferences. If the user enters both the Bill and the Bill Credit (e.g. for the 2% discount) at the same time, QuickBooks will always auto‐apply the Bill Credit. Then, the QuickBooks user can selectively remove any Credits that the company is not eligible to take. This maximizes adoption of discounts based on date driven terms.

There is No Memo Field on Discounts

Customer and Vendor Discounts do not allow you to include a memo describing the reason for the discount. This is especially crucial when the discount is related to a quality of service dispute, damaged products shipped to the customer or received from the vendor (but not shipped back) or any other special discount issue for which you need to make a notation.

Customer and Vendor Discounts Are Not Separate Transaction Types

Discounts are linked to the Receive Payments transaction for customer discounts and the Bill Payment transaction for vendor discounts. On detail reports, the discount amount shows as a separate line, but you do not have the ability to filter QuickBooks reports (or use Find filters) by Transaction Type for Customer Discounts and/or Vendor Discounts