If you’re recording money coming out of your business in Quickbooks Online, it can be confusing to look at the options and see that both Bills and Expenses are options to choose from. They are separate items for a reason and not interchangeable, so it is important to be using the correct feature at the right time.
Bills
Bills should be used when your business gets invoiced for something that you don’t plan on paying immediately. For example, the terms of the invoice say that they should be paid in 30 days. You decide that you want to live dangerously and not pay them until the very last day. Quickbooks can help you keep up with with those dates and the amounts that you owe.
If you are keeping up with inventory, bills are a great feature to use. You can put in the products you purchased and the amount, and it will update inventory in the system for you.
When you have paid these bills and the amount comes through the banking feed, you need to make sure that you choose “Find Match” and match your payment to the correct bills. It will update the amount that you owe the vendor. If you don’t match it, then it will record it as an expense, explained below:
Expenses
An expense is money that is being spent at the moment. There will be no amount that you “owe” the vendor, because the money has already been sent out. Expenses can be cash, credit card, or checks.
If you simply “categorize” money going out in the bank feed, it will be recorded as an expense. You can also go to “+New” and “Expense” to record this expense as soon as you do it, so you’re available checking balance in Quickbooks will be updated and correct based on the money going out, even if it hasn’t come out of your bank yet.
Which Should You Use?
Your business will probably use both of these options at different times. If you know that you owe $3,000 in rent every month, you can set a recurring bill to automate on the first of each month. When you go to check how much you owe vendors, you can easily see that you owe your rent and make a plan to pay it.
Everything that isn’t “owed” but is simply “being paid” is an expense, so you will likely have many expenses in the course of your business.
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