Trading Services Between Customers and Vendors

This is an excerpt from The Sleeter Group’s QuickBooks Consultant's Reference Guide – Version 2009. This book has over 500 pages of tricks and works-arounds for difficult client situations. The QuickBooks 2009 edition is updated with extensive coverage of QuickBooks Enterprise Solutions, third party add-ons, and all the new features with the 2009 version. For more information on this resource, visit www.sleeterstore.com.

If you buy services or products from your customers, you might want to “trade” instead of paying each other. If you don’t exchange money, but instead exchange credits against what each other owes, you’ll need to record a few special transactions in QuickBooks to ensure that all your reports are accurate.

For example, if you sell the customer taxable Items, or if you buy inventory Items in the trade, you want to make sure your accounting is accurate even though no cash changes hands.

Use the following method of accounting for trades when either of the following occurs:

You owe money to one of your customers and they owe money to you. You pay the customer by issuing a credit on their account. They, in turn, issue a credit for an equal amount on your account to pay you.
You owe money to one of your vendors and they owe money to you. You pay the vendor by issuing a credit to their account. They, in turn, issue a credit for an equal amount on your account to pay you.

For each customer you trade services with, set up a Customer record in the Customer Center, and a Vendor record in the Vendor Center. The Customer and the Vendor are actually the same company, but in order to track both purchases and sales in QuickBooks, you need a Customer and a Vendor for the same company.


Figure 1 Create a customer record


Figure 2 Create a vendor record for the same company

Step 1. Create a Bank account called “Trade Clearing” as shown in Figure 3.

Figure 3 Trade Clearing account

Step 2. When you buy from this customer/vendor, enter a Bill from the vendor Smith & Smith-V normally, and use whichever accounts or items to which the bill should apply. Enter a Bill recording the purchase from Smith & Smith as shown in Figure 4.

Figure 4 Enter a Bill from the “Vendor” when you purchase something from them.

Step 3. When you sell products or services to this customer/vendor, create an Invoice to Smith & Smith-C. Enter the Items you sell just like on any other normal invoice.

Figure 5 Create Invoices (not Sales Receipts) for the Customer

Step 4. The next step is to clear the Customer invoice by receiving a payment for the amount of the “Trade” using the Trade Clearing Bank account. Note that in order to see the Deposit to field on Figure 6, you need to uncheck the preference to “Use Undeposited Funds” in the Sales & Customers Company preferences. See Figure 7.

Figure 6 Receive payment for the traded amount and deposit it to Trade Clearing.


Figure 7 This setting allows you to select a bank account on the Receive Payments screen

Step 5. Since you owe the vendor more than you invoiced him you want to Pay Bills and select to pay the amount of the bill in full, again using the Trade Clearing as your bank account.

Figure 8 Pay bills for the full amount

Step 6. The final step is to write a check to the Vendor for the $300.00 balance owed.

Figure 9 Create a check for the amount due your vendor

Below is a picture of your Trade Clearing register. Your balance in this account should be $-0- after each transaction. You can actually reconcile this like any other bank account and see which transaction is not in balance.


Figure 10 Trade Clearing register

If your Customer (Invoice) owes more than their Vendor bill to you, you would receive the excess payment into your deposit using Trade Clearing as the “From Account.”

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