QuickBooks Payment Methods: Clearing Up the Confusion

Vendor Bills: Payment Methods in QuickBooks

We receive many messages from readers every week on the subject of payment methods for paying vendor bills. The messages include the list of payment methods the user has created in the QuickBooks Payment Method list (DirectDeposit, DebitCard, Cash, PayPal, etc.) followed by a request for help on how to make those methods available in QuickBooks when paying vendor bills.

The payment methods you create are for customer transactions only; they represent methods of receiving income. They can't be used for paying vendor bills. There are only three possible payment methods for paying vendor bills in the QuickBooks Pay Bills window:

  1. Check
  2. Credit Card (only available if you have set up your credit card as a Credit Card account in the chart of accounts).
  3. Online Payment (only available if you have set up online payment services with your bank and configured your bank account in QuickBooks for online payments).

Most of the time, the various payment methods you use to pay the vendor are really "checks". If you use a debit card, an automatic withdrawal by the vendor, an online payment you created on the vendor's web site, or you created an online payment on your bank's website (instead of using the QuickBooks online payment function), that's a check. It's just not a physical check, so it doesn't have a number. Select the option labeled Assign Check No. (instead of the option "Print Checks") and leave the check number blank. Some people prefer to use "codes" for the check number, such as Debit, or DirDep, or ACH, but I leave the field blank so I don't have to re-sort the register when I reconcile the bank account (since my bank statement isn't sorted by those codes).

If you use PayPal and PayPal withdraws the money from your checking account, that's a check, too. If your PayPal account is busy and complicated (you have money flowing in both directions) and you've set up a PayPal account as a bank account, payment by PayPal is still a check, but you have to remember to select the PayPal account as the bank in QuickBooks.


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