8. Expenses

In this section of the The Guide, we’re going to learn about expense transactions in nonprofit bookkeeping. And I have good news – now that you’ve made it through the revenue section, entering expenses is going to be a breeze! You’re already familiar with the navigation in QuickBooks Online and expense transactions use many of the same fields as revenue transactions. Expenses are also simpler because there are fewer considerations and scenarios that can change how they get entered to QBO. You buy something and pay for it, or you get billed for something and then you pay for it a little later, and that’s about all the expense scenarios you’ll come across!

When you enter an expense, you will either enter an Expense or a Bill followed by a Bill Payment. Occasionally, you might enter a Check on its own. If any of the expenses you’re entering are covered by a restricted fund, you will include that information in the “Customer” field when you enter the transactions. 

Expense transaction types in QBO and when to use them

Expense – Use Expense when you pay for the product or service at the time you receive it. So this is used for things like debit and credit card purchases and recurring auto-payments that aren’t billed in advance.

Bill – Use Bill when you receive a bill that needs to be paid. For accrual basis accounting, it’s important to record bills using their invoice date. This records the expense when it was incurred. If you’re on cash basis accounting, bills generally don’t get entered until they are actually paid. That being said, you can still enter them in QBO when you receive them, if you want to. This can help you track what bills are still outstanding and need to be paid. When you run reports on cash basis, any unpaid bills will be excluded.

Bill payment – Use Bill payment, regardless of the payment method, when you have submitted a payment for a bill.

Check – Use Check when you write a physical check. A check can be payment made at the time of purchase or to pay a bill that has already been entered.

Like revenue transactions, expenses, bills, and checks can be split into multiple lines. This way, you can split the amount of one transaction to be coded to multiple accounts, classes, and/or restricted funds as needed. 

Also like the revenue transactions, each of the expense transactions allow for adding attachments at the bottom of the screen. I’ve left this out of the details below, so just know that is still available.

A note on QBO functionality and additional options:

These instructions assume all payments are made outside of the QBO system and are entered after the transactions have taken place. There are a couple use cases where payments will actually originate within the QBO system.

The first is printing checks from QBO. If you have blank check stock, you can enter the check information to QBO and then print the checks to mail or hand out to vendors.

The second is QuickBooks Bill Pay. This is an additional paid service and allows you to make ACH and check payments straight from the QBO system. You may have noticed the “Schedule Payments” option in some of the screenshots or in your QBO account. That is related to the bill pay service.

I don’t provide details for these use cases in this guide, but QBO has a step-by-step guide for printing checks here. QBO will also provide more information for the bill pay option if you click on the “Schedule Payments” option anywhere in the system.

Use the dropdowns below to see the step-by-step instructions for entering each transaction type.

Enter an Expense

Navigation: +New > Expense

Expense

• Payee – The Vendor you paid. (If the vendor isn’t in QBO yet, you can choose to add a new vendor in the Payee dropdown menu.)
• Payment account – The bank account, credit card, or other payment account that you used to make this payment.
• Payment date – The date on which the expense occurred and payment was made.
• Category – The relevant account in the chart of accounts that this expense should be coded to.
• Description – A brief description of the expense.
• Amount – The total amount of the expense, if recording all on one line. If splitting the expense, then just the portion that will be coded to the selected account, customer, and class for this line.
• Customer – If this expense is covered by restricted funding, this is where you choose the restricted fund. If you want to keep track of your restricted fund activity and balances, it is very important that you don’t skip this step!
• Class – This is where you choose whether the expense is Admin, Fundraising, or Program related.

Enter a Bill

Navigation: +New > Bill

Bill

• Vendor – The Vendor you paid. (If the vendor isn’t in QBO yet, you can choose to add a new vendor in the Vendor dropdown menu.)
• Terms – This is optional and will adjust the due date based on the invoice date.
• Bill date – The invoice date on the bill.
• Due date – When payment on this bill is due.
• Bill no. – The invoice number on the bill.
• Category – The relevant account in the chart of accounts that this expense should be coded to.
• Description – A brief description of the bill.
• Amount – The total amount of the bill, if recording all on one line. If splitting the expense, then just the portion that will be coded to the selected account, customer, and class for this line.
• Customer – If this bill is covered by restricted funding, this is where you choose the restricted fund. If you want to keep track of your restricted fund activity and balances, it is very important that you don’t skip this step!
• Class – This is where you choose whether the expense is Admin, Fundraising, or Program related.

Record a Bill Payment

Navigation: Menu > Expenses > Bills

Navigation: Unpaid > Choose bill to mark as paid

When you get to the bills menu, toggle over to the unpaid bills. Find the bill that was paid and click the arrow next to “Schedule Payment.” Choose “Mark as paid.” This will bring you to the Bill Payment screen for that Bill.

Top section of Bill Payment

• Payee – The Vendor you paid. This will already be filled in.
• Bank / Credit account – The bank account, credit card, or other payment account that you used to make this payment.
• Payment date – The date on which the payment was made.
• Ref no. – If you paid by check, put the check number here. If there is no reference number, you can leave this blank.

Bottom section of Bill Payment

Scroll down and you will see the current bill marked for payment. If you paid multiple bills for the same vendor at the same time, you can choose the other bills here to record the full payment. If you made a partial payment, you can adjust the amount in this line.

Enter a Check

Navigation: +New > Check

Check

The check has all the same fields as the expense transaction aside from the Check no. field. This is where you add the check number from the check you used.

Check payment for an open bill

When entering a check, if you choose a vendor with an open bill, that bill will show up on the right side of the screen. If this is the bill you’re paying by check, you can click “add” and you will be redirected to the Bill Payment screen.

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