Vendor Bills and the "Dancing Dollars"

As any company that has attempted to manage inventory in QuickBooks knows, QuickBooks just doesn’t provide the functionality that you need to keep things properly managed and tracked.

However, once you have a Fishbowl/QuickBooks environment, you must do things differently than you would in a stand-alone QuickBooks environment. Otherwise you can end up with inaccuracies and discrepancies in your books.

Receiving and reconciling inventory in Fishbowl

A good example of this is the process for receiving and reconciling inventory in Fishbowl. Fishbowl has a two-step process for receiving and reconciling inventory:

1. Receive the parts in the receiving screen in Fishbowl. This triggers Fishbowl to send an Item Receipt to QuickBooks.
2. Reconcile the Vendor Bill to the Item Receipt. This should be done in Fishbowl by the person responsible for accounts payable. This triggers Fishbowl to send a Bill to QuickBooks and delete the Item Receipt.

While this is a fairly straight-forward process, the potential problem lies in an important detail: the date associated with these transactions.

What date should be entered for the Vendor Bill associated with this inventory?

Whether you are working in a QuickBooks-only environment or a Fishbowl/QuickBooks environment, my recommendation is the same. When entering the Vendor Bill, ignore the date that is printed at the top of the Bill. Instead, you should enter the date that the goods were actually received as the date of the Bill.

What are the consequences for not doing this?

In a QuickBooks-only environment, if you use the Vendor Bill date instead of the date the items were actually received, you can drive inventory counts negative and/or undo Assembly Builds. But because the date on the Vendor Bill moves both the dollars and the quantities, your sub-ledger and your general ledger will continue to agree.

In Fishbowl, regardless of the date that’s actually on the Bill, the date entered for the Vendor Bill should always be the date of the original receipt. Otherwise your sub-ledger (which is in Fishbowl) and your general ledger (which is in QuickBooks) will not agree, creating what I call the “dancing dollars” effect in QuickBooks.

How do the "dancing dollars" occur? 

A change in date will move the dollars in QuickBooks, but the inventory quantities in Fishbowl will remain static based on the receipt date. Say you received a bill dated November 5th for a part that was received on October 30th. If you go into Fishbowl and enter November 5th as the date on the Vendor Bill and October 30th as the date on the Item Receipt, then once everything gets pushed to QuickBooks the inventory counts will show in one month, but the dollars associated with that inventory won’t show until the next month. Your dollars will be “dancing” from one month to another, and your books will be inaccurate.

What if you get the bill before the inventory arrives?

Hold off on entering the bill into the system until the inventory gets there, so that you can use the inventory received date as the bill date. Regardless of whether it’s the bill or the inventory that arrives first, to avoid the “dancing dollars” problem the inventory received date must be entered as the bill date.