How to Enter a Purchase Order in QuickBooks Online - dummies

How to Enter a Purchase Order in QuickBooks Online

By Elaine Marmel

Businesses that order lots of stuff from vendors often use purchase orders to keep track of the items on order. Purchase orders in QuickBooks Online (QBO) do not affect any of your accounts; instead, they simply help you keep track of what you order. And, when the order arrives, you can compare the goods that come in the door with the ones listed on the purchase order to make sure they match.

If you plan to use purchase orders, then your ordering process typically happens in the following way:

  • You place an order with a vendor and you enter a purchase order in QBO that matches the order you placed.

  • You receive the items you ordered, typically along with a bill for the items; you then match the items you receive to the purchase order and enter a bill for the items. Note that sometimes you receive the bill without the items or the items without the bill.

  • You pay the vendor’s bill.

You enter a purchase order using the Purchase Order transaction window; you can open this window either from the Expense Transactions page or from the Create menu (the plus sign). A typical purchase order looks like the one shown here, and you’ll notice the window closely resembles the Check window.

The Purchase Order window.
The Purchase Order window.

As you fill in the Purchase Order transaction window, QBO assigns a status of Open to the purchase order; the status appears just below the vendor’s name in the upper-left corner of the transaction window.

When you receive the goods, the vendor’s bill, or both, you record a bill, or a check, an expense transaction, or a credit card charge, showing what you paid (or what you owe) the vendor.

When you select a vendor who has open purchase orders on any of these types of transactions, a pane appears on the right side of the window, showing available purchase orders. You add a purchase order to the transaction the same way you added a bill to a Check transaction: by clicking the Add button. Here, a Check transaction has been opened and a vendor who has open purchase orders is selected.

The Check window, with a vendor selected who has open purchase orders.
The Check window, with a vendor selected who has open purchase orders.

When you click Add to add the purchase order to the transaction, QBO adds the purchase order lines to the first available line in the Item Details section of the Check transaction. QBO also indicates, below the vendor name, that the Check transaction has one linked transaction.

A Check transaction after adding a purchase order to it.
A Check transaction after adding a purchase order to it.

If you save the Check transaction and then reopen the purchase order, QBO has changed the purchase orders status from open to closed so that you don’t accidentally add the purchase order to another transaction.

If you add the wrong purchase order to a transaction, you can remove the purchase order line in the Item Details section by clicking the trash can icon at the right edge of the line.

QBO can’t add only part of a purchase order to a transaction. So, if you receive only part of a purchase order, add the purchase order to your transaction and then record a payment for the part of the purchase order you received by deleting lines from the check for items you didn’t receive. To continue to track the outstanding part of the purchase order, you can manually close the original purchase order and create a new purchase order that contains the remaining outstanding items; when you create the second purchase order — essentially a back order — try to assign a number to it that helps you track it in relation to the original purchase order.

You can use your own custom purchase order numbers if you choose Gear→Company Settings→ Expenses. Then click the pencil beside Purchase Orders to edit purchase order settings, select the Custom Transaction Numbers check box, and then click Save.

When you need to identify open purchase orders, use the Open Purchase Order List report.