Customers that are also expenses

Hi Steven!

A lot of posters are also getting help with this scenario especially when they realize they need to provide 1099s at the end of the year. Good thing you asked.

In this process, you'll want to create a vendor profile for the customer, where you record your bills or expenses. Then, offset the customer and vendor balances using a clearing account. I'll walk you through the steps.

First, create a vendor profile. Enter a small difference in the name, such as a middle name, or add the word vendor, so you can save the profile. Then, record your bills.

Second, create a clearing/barter/wash account where you move balances from Accounts Receivable (vendor) to Accounts Payable (customer) or vice versa.

1. Go to Settings ⚙ then select Chart of accounts.
2. Select New to create a new account.
3. Under the Account Type ▼ dropdown, select Bank.
4. Under the Detail Type ▼ dropdown, select Cash on hand.
5. Enter the account name. (ex. Barter Bank Account)
6. Select Save and Close.

Third, if you use the customer balance to pay vendor bills, make a journal entry. Credit the A/R  and tag the customer in the NAME field, and debit the clearing account.

This step creates a credit to the customer profile, which can be applied as payment to its invoices. The clearing account balance also increases, which can be used to pay the vendor bills. You can view the customer's transaction list and the clearing account afterward to see the effects.

Fourth, pay the bills using the balance in the clearing account.

Fifth, pay the invoice in the customer's profile using the credit that was credited by the journal entry, and this will reduce the customer's balance.

That's it. If you have other questions as you follow the steps above, you can always go back to this thread. I'll be happy to help you again.