Using credit cards to pay vendors in Dynamics GP
January 4, 2009 45 Comments
There are a number of different ways to record paying vendors with credit cards in GP. This is a topic that comes up periodically in newsgroups and I would like to share what I have personally found to be the most straightforward and comprehensive way. This is a long one but at least there will be lots of pictures. Even so, you may want to get comfortable and grab a cup of coffee first. Don’t say I didn’t warn you. 
There are typically three important goals that companies have when paying their vendors with credit cards:
- Most of the purchases need to be recorded against the actual vendors. Especially for inventory purchases.
- Monthly credit card statements need to be reconciled quickly so there is no delay in paying the bills and no huge unapplied payments sitting in GP because it takes so long to reconcile and enter the statements.
- There are many ‘one time’ or ‘miscellaneous’ vendors that are paid with credit cards. While it is not important to track these purchases under individual vendors (as in # 1 above), it is still important to keep track of who the vendor was and to make it easy and fast to reconcile these purchases on the statement (as per # 2 above).
Keeping these goals in mind, let’s walk through a few examples. I will be using Dynamics GP 10.0 for the navigation and screen shots, but this process is the same in any version of GP. Please click on the screen shots to see them larger/clearer.
First we need to create a payables vendor for each credit card. The important step here is to create a different vendor for each distinct account that you get billed for or pay. If you have three American Express accounts that get billed and paid separately, create three vendors. For our example I will create one AMEX vendor (Cards > Purchasing > Vendor):
Next step is to set up a Credit Card (Microsoft Dynamics GP > Tools > Setup > Company > Credit Cards). I typically use the Vendor ID for the Card Name (unless your vendor ID is something like 12345). To set up a credit card to pay vendors select Used by Company, choose Credit Card and enter the Vendor ID associated with the credit card vendor:
That is all the setup required. Now you are ready to enter transactions. There are a number of typical scenarios:
Scenario 1: You purchased non-inventory items from a vendor want to track and pay them with a credit card. You have not posted the invoice yet.
This can be handled in one transaction (Transactions > Purchasing > Transaction Entry). Enter the transaction like you would normally enter a non-inventory payables invoice, then enter the amount you paid with the credit card on the bottom right:
When you tab off the Credit Card amount, the Payables Credit Card Entry window will pop up. Choose the credit card and date. Important: to accomplish our goal # 2, we need to change the Receipt Number to include whatever will help us match this purchase with the line item on the credit card statement. This Receipt Number will become the invoice number under the credit card vendor. Typically the date and the ID (or name) of the vendor you are paying is enough:
Note that I put the date in a little strangely: 081219 for December 19, 2008. This is by no means a requirement, but a ‘trick’ that I have gotten used to as a nice additional sorting mechanism for my transactions. I will remind you of this a little later on in the example.
If there are multiple charges from the same vendor on the same date, you will need to come up with unique Receipt Numbers, so either use the last few digits of the Document Number (081219 STAPLES 462), add a letter to the end (081219 STAPLES A) or something similar. While you may not be able to fit the entire vendor ID or name in here, usually you can get enough in to allow easy reconciliation.
The GL distributions on this may be surprising if you have not entered similar transactions before:
It is crediting the Accounts Payable account because you still owe that money to the credit card vendor. However, the type of that distribution is CASH because you are entering a ‘payment’. If you have a different Accounts Payable account set up for the credit card vendor, you will see that account here, not the Accounts Payable account for the vendor you are entering this transaction under (STAPLES in this case).
Once posted, what this will accomplish:
-
Creates an invoice under the STAPLES vendor.
-
Creates a payment under the STAPLES vendor and applies it to the invoice in # 1 above.
-
Creates an invoice under the AMEX vendor. This invoice is open (unpaid) at this point.
STAPLES vendor
AMEX vendor
Scenario 2: You have already posted the payables invoice under the correct vendor or you have purchased inventory items and have posted the invoice in POP.
Since the invoice is already posted, we just need to enter the payment side, which is done as a Manual Payment (Transactions > Purchasing > Manual Payments). The Vendor ID will be who you are paying, the Payment Method is Credit Card, once you choose that you will see a lookup for the Credit Card Name. For the Document No. enter the date and the vendor you are paying as this will become the invoice number under the credit card vendor. In this example, we have already posted an invoice for DELL, now we are recording that we paid them with a credit card:
Enter the amount paid by credit card and Apply just like you would any other payment. Again the GL distributions may not be exactly what you are expecting:
The CASH type distribution is recording the payment, but since it was made with a credit card and not cash, it is crediting Accounts Payable (this will be the Accounts Payable account from the credit card vendor). The PAY distribution is recording the payment to the original vendor (DELL in this case). Basically, this transaction moves the liability from one vendor to another.
Once posted, this will add a payment to the DELL vendor and an open invoice to the AMEX vendor:
DELL vendor
AMEX vendor
Note the order of the transactions for the AMEX vendor – they are sorted in correct date order, even though they are in different years. This is because of how I entered the date with the year first and using 6 digits. Again, not a requirement, but it makes your credit card vendor invoices sort automatically with the default sorting GP uses.
Scenario 3: You purchased something from a ‘one time’ or ‘miscellaneous’ vendor using a credit card. You do not really want to clutter up your Vendor list, as you might only buy from this vendor once or twice.
This should be entered as a payables invoice directly under the credit card vendor (Transactions > Purchasing > Transaction Entry). The vendor ID will be AMEX in my example and the Document Number will have the date and the name of the vendor. I also put the full name of the vendor in the Description, as there any many times with this scenario where the full name will not fit into the Document Number:
Having the full name in the Description will make it much easier to search for this vendor in SmartList. Once posted, this will show as another open invoice under the AMEX vendor.
When you receive your credit card statement, open the Payables Transaction Inquiry window (Inquiry > Purchasing > Transaction by Vendor), uncheck History and Work, and you will have a list of all open (unpaid) transactions to reconcile to the statement. And if you have used my date ‘trick’ they will even be sorted very closely to what should be on the statement:
Of course you can get this list of transactions in SmartList as well and export it to Excel if that is preferable. Typically I find that with this method I just check off the transactions I already have in GP on the credit card bill and circle the ones I still need to record.
This method is certainly not for every company out there paying vendors with credit cards. However, it may provide some solutions for many. My goal is simply to offer options.
I have gotten feedback in the past that this method is very time consuming because you have to enter all the individual transactions instead of one transaction for the entire credit card statement. In a few cases that is true. But in many other cases I have seen companies take days to reconcile the AMEX bill once it is received. In those cases, this method may provide a viable alternative.
I would also encourage companies with a high volume of credit card transactions to log in online periodically (virtually every credit card company/bank offers this feature now) and spot check to see if they have all the transactions in GP that the list online shows. If not, this can help get the information from those card holders that typically lag in getting you their receipts or tend to lose them before the statement even shows up. And it is a lot easier to remember what happened last week than what happened a month and a half ago.
Victoria, please explain something to me. Your screen shot in Scenario 1 shows you making a credit card payment of $234.25. The total purchase amount is the same – $234.25. But you also have an On Account amount of $234.25. If you’re making a payment for the full amount, why is there an On Account amount? Also, when I do this, my On Account amount defaults to zero so how are you getting an On Account amount? Another thing, if the On Account is zero, when I post, the transaction doesn’t affect Payables but I do get a GL hit. So now I have a discrepancy between my PM and GL account. So I assume the key is the On Account amount but again, if my payment is the total purchase amount I don’t get an On Account amount. Please explain. Thanks.
Jimmy,
If you look at that screenshot carefully, you will notice the cursor is still on the Credit Card field, after the amount – that means the screenshot was taken before I tabbed off the Credit Card field. As soon as you tab off that field the On Account amount will change to zero – so what you are seeing is correct.
As to your other question – if your credit card is set up to go to a Vendor with the AP GL account for Accounts Payable, when you pay another Vendor’s invoice with this credit card, it will create a payables invoice for the credit card Vendor. So there will still be an increase (credit) to the AP GL account and an increase overall in the Payables subledger, just to a different Vendor.
Hope that helps.
-Victoria
Yes, when I do a vendor summary I do see the payable to this vendor. However, I was testing the new Reconcile to GL feature of GP10 (not 2010) and immediately after posting an example of paying a vendor with a credit card I ran the Reconcile to GL process for Payables and there is a GL hit (on the right side) of the spreadsheet that gets created but nothing shows on the Payables side (the left) so the spreadsheet shows a discrepancy. Is there something else I need before I run this Reconcile to GL process to see that transaction show on the PM side?
Unfortunately, this is just one of the shortcomings of the Reconcile to GL functionality. I do not know a single company that is actually using the out-of-the-box Reconcile to GL functionality routinely or successfully.
-Victoria
That sucks. I thought that spreadsheet was a cool feature but if it’s not accurate what good is it. Now I’m really bummed.
Jimmy,
If everything is entered correctly, you should not need a tool to help reconcile, as everything will reconcile already.
Why look for ways to fix problems before they happen, why not prevent them instead?
-Victoria
Yes. That would be best but things don’t always turn out that way.
Regarding paying a vendor with credit card, is there a difference between this method and paying a vendor with a credit card via Manual Payment? I tested that but both accounts – the credit and debit – are the same AP account. I read Mr. Daoud’s article but it’s still a little fuzzy.
http://mohdaoud.blogspot.com/2010/07/when-using-credit-card-option-in-manual.html
Not sure I want to change the AP account to a cash account on the vendor I setup as the credit card vendor. Then if I use that same card as the way it’s described in this article it will behave different right? That is, I won’t have a payable to the credit card vendor since it will hit the cash account rather then the AP account. I’d have to change the account back and forth. I don’t like that. So how to handle that?
I am not sure what that article is really addressing either, sorry. I would never recommend that you change the AP account on a vendor with every transaction, whether it is a credit card or not. THAT is what gets you in trouble with reconciling. My suggestion earlier was about a one time upfront change when setting up credit card vendors.
Whether you are using a Manual Payment transaction or not has absolutely nothing to do with whether you are paying with a credit card or what account numbers will be used. Take a look at scenario 2 in my post above. A Manual Payment simply lets you record the fact that you paid another vendor with a credit card after your invoice to the original vendor has already been posted.
-Victoria
Victoria,
We are currently using manual payments, scenario 2, for a credit card payments but are having issues with payments becoming unapplied on our vendor accounts. Take for example yesterday I notice that an invoice appeared dated 06/03/09 as open. I went in to investigate what happened and discovered that this invoice was in fact paid via a manual payment to our credit card vendor. The payment on both accounts are still there and show that they have been fully applied to this invoice. Yet the invoice is now open with no payment to apply it to. I also have a invoice on one of our credit card vendors that shows that it is fully applied even though there is nothing showing applied to it. Have you ran into these situations and have any suggestions for solutions?
Teresa,
The only time in Payables that anything will become unapplied is when something is voided. There is no unapply and reapply option in Payables, so it is not possible that someone could go in and unapply a previously applied document. Can you confirm that there are no voided payments? It may also be that something went wrong somewhere, perhaps running a Reconcile would help (Tools > Utilities > Purchasing > Reconcile).
-Victoria
There are not any voided payments that is the weird thing. The payments show that they are completely applied and paid out but for some reason the invoices are becoming open months later when the payment is still showing fully applied and paid to that invoice. I will try the reconcile. Thanks.
Teresa,
Very strange. I have not seen anything like that in all my years of using and supporting Dynamics GP. Are there any customizations or 3rd party products installed? Is anyone changing data directly in the GP database?
-Victoria
We don’t have any ad ons or data directly changing on the purchasing side of dynamics. I also ran the reconcile report and that did not correct it. Thanks again for the help.
Victoria,
We used to do this using the “separate GL AP account” method and decided to stop doing that and use just one AP account to make it all simpler.
Now we’re having trouble figuring out how to show the transactions in a SmartList the way you mentioned above. Could you walk us through building the SmartList to show the same transactions as they show up in the Inquiry?
Daniela,
The SmartList I am referring to above is under Payables Transactions. Add a column for Current Trx Amount and then search for all transactions where the Vendor ID is your Credit Card Vendor and Current Trx Amount is greater than 0.
-Victoria
Thanks Victoria. This is very helpful.
I setup a separate GL account for the credit card. Now, I can see the transactions by filtering on the GL account in the “Account Transactions” Smartlist.
Also, I added the “Reference”, “Originating Master ID”, “Originating Master Name”, and “Originating Document Number” columns to the “Account Transactions” smartlist. Those columns bring in the “Description”, “Vendor ID”, “Name”, and “Document Number” fields respectively from the Payables Transaction Entry screen.
It works great!
Tim,
That’s awesome – thanks so much for the feedback.
-Victoria
Victoria, We implemented your procedure for credit card invoices and payments, however, we are running into a problem when we try to reconcile our AP module to the GL. When we enter the invoice it credits AP with a type of CASH and debits the expenses with a type of PURCH. The payment does not have a distribution attached. The transactions hitting AP with a type of CASH do not appear on the reconciliation spreadsheet created when you run the Reconcile to GL process. Would you be able to help me? Thank you, Susan
Susan
Are you talking about the ‘Reconcile to GL’ routine in GL 10.0? For what it’s worth, I don’t know anyone that feels that routine works well, or even correctly. What you are seeing is just one of the issues. However, that routine is not needed to reconcile AP to GL – it is simply a tool added in GP 10.0 to help reconcile AP (or AR) to GL if/when there are issues.
One way I can think of to get around this particular limitation is to create a different AP account for the credit card payable. It is not necessarily the optimal solution and I would recommend doing some testing to make sure there are no other issues with it, but what that will do is make the CASH distribution go to the credit card payable account, not your regular AP account.
-Victoria
Hi! Your tutorial is great! I wish I had it when we were setting up the credit card function in GP. Anyhow, it’s all set up and we’ve been using it for a while with a few minor issues. My problem is that we pay vendors both with credit cards and with cheques so when we do a normal cheque run, in the “Edit Payables Cheque Batch” screen, we still get all the documents from vendors who we’ve already paid with a credit card. The documents paid by credit card all show up as 0 amounts with credits applied to them (from the credit card payments) and while this is ok, the list keeps getting longer the more credit card payments we make. I’ve looked through the manual but I can’t seem to find a way to get rid of them from this screen. Would you happen to have any suggestions?? Thanks!
Hi Kathryn,
Try this: go to Tools > Setup > Purchasing > Payables and uncheck the ‘Print Previously Applied Documents on Remittance’ at the bottom.
-Victoria
You rock Victoria!! Thanks for the quick reply! I tried it out and while it only works when you build a batch (instead of going straight to edit payables cheque batch) it is better than nothing. Thank you thank you thank you!! You are my new GP hero ^_^
Thanks Kathryn!
It should also work if you select the checks one at a time using the Edit Payables Checks window.
-Victoria
Thank you VY. Its a very nice and helpful blog.
Trying to correct a problem we have had for years. We have 15 credit cards assigned to our sales people. Each have their own card and seperate bills come from the vendor for each. They Mastercards through Wells Fargo. They are all assigned to Wells as a single vendor. All transactions are posted through A/P using the same vendor ID (Wells Fargo). The only distinguishing fact is we use the credit card account number for the document number. The transaction debits the G/L expense account and credits A/P. The problem, when you look at the G/L expense account, you don’t know what the purchase is for, other than it says Wells Fargo. You literally have to go back to each paper transaction to see what it was for!? And, at the end of the month we have a mound of receipts to reconcile! Do I understand that a seperate vendor needs to be set up for each credit card and how do I get the description to show in the G/L expense. If we are to use a different Vendor ID for all credit card purchases, we would have a thousand different misc. vendors!? Suggestions?
Thanks
Phil,
I would not use a different vendor for each credit card unless you are paying each one separately. There are really 2 issues that I hear you bringing up: 1. Reconciliation of the bill each month. 2. Seeing the detail of the expense in the GL. While having separate vendors might help #1 somewhat, it will actually make paying the bill rather difficult if these are all on one bill and it won’t help #2 unless you make some additional changes.
If I am understanding what you’re doing correctly, you are simply waiting for the bill to come in each month and then matching up the bill with all the receipts? If so, this is not the method that I recommend. I recommend entering each purchase as a separate payables invoice. This way, you’re not looking through a pile of receipts to reconcile to the bill, you’re looking through a list in GP (or on paper once you’ve printed it out). While at first it might seem like a lot more work to enter each transaction individually, in the long run you will save so much time reconciling each month, it will be well worth it.
I would assign a code to each card, maybe the salesperson initials, or something else unique, and then use that as part of the document number. So, if I were a salesperson, the document number for one of my purchases would look like: ‘VY090821 STAPLES’ – which would signify my card, purchase date of 8/21/09 and vendor Staples. When reconciling this to the monthly credit card bill, this should be very easy to match up.
As far as seeing more detail in the GL, this may depend on what GL reports you are looking at, but there are generally 2 places where you can put details or notes for the expense:
- Description for the transaction on the Payables Transaction Entry window
- Distribution reference on the Payables Transaction Entry Distribution window
Again, this gets a lot easier to do if you are entering an individual transaction for each purchase. This detail will stay with the transaction and show up in the GL if you are posting your payables transactions to the GL in detail.
Hope this helps.
-Victoria
Hi Victoria – thanks so much for all your help. I have created a new problem now. I posted an invoice to a vendor, then paid the invoice with the Amex card. I realized I had made a mistake, the payment was not paid by the credit card, so I went in and voided the payment. Now the invoice shows up under both the regular vendor as well as the credit card vendor account. the A/P trial balance is off from my general ledger by the amount of the invoice. The invoice under the Credit Card vendor account does not have any distribution accounts. Any suggestions as to what I should do now?
Thanks,
Pam
Hi Pam,
If I am understanding the sequence of events correctly, you should now void the invoice under the Credit Card vendor. That should have a zero net change on your GL balances but bring your AP subledger balance down by the amount of that invoice. I hope that helps to resolve this.
-Victoria
Thanks, that was perfect. I had never voided an open payables transaction before. Thanks so much for your help!
Pam
Hi Victoria,
Thank you very much for publishing this blog. It is very well-written and helpful. I followed your suggestions and was very happy with the results in accomplishing goals 1, 2, and 3. However, I have one small problem, and I would greatly appreciate your feedback. I recorded July transactions from my July AMEX statement with a payment due date of 08/21/2009. The problem I face is that some charges from the statement are placed in the wrong aging bucket on my payables aging. For example, a charge on 07/23/2009 is listed in the 1-30 days bracket of my payables aging run on 08/04/2009, since both the Doc Date and Due Date of the charge are 07/23/2009. However, since the AMEX payment is not due until 08/21/2009, this charge should be listed as current.
I don’t want to date the invoice 08/21/2009 because the charge actually occured on 07/23/2009 when the vendor was paid by CC.
I bet the solution is obvious and easy, but I can’t seem to wrap my mind around it right now. Thanks in advance for your help, and thanks again for publishing this great article.
-Jason
Jason,
Thank you very much for your kinds words!
Is the issue that the due date is incorrect on some transactions? If so, you can change it by going to Transactions > Purchasing > Edit Transaction Information. Please write back if that does not answer your question.
-Victoria
Yes, that was the issue. Thanks for quick and helpful reply.
I was unaware of the Edit Transaction Information window. That was a very quick fix. We went live with our Dynamics system on 07/01/2009 and I’m still acclimating to it. I will visit your website often in search of solutions!
Victoria,
Is there anyway to edit a credit card’s setup options after they have been saved? I have a card with the “Used by Company” and “Check Card” options chosen with a defined checkbook. However, I cannot change from a “Check Card” to a “Credit Card” because the option is greyed out when I open the setup window.
Thanks,
Brendan
Brendan,
There is no way to change this from within GP once it’s been set up and used on a transaction. While it is possible to change it in SQL, this is not supported, and I have never tested this, so I cannot tell you if it will cause issues. The easiest option is to create a new credit card with the settings you want. If you absolutely must change it, set up a test company, change this in SQL, and test any and all transactions you can think of to make sure nothing breaks (don’t forget to test voiding).
-Victoria
So, do you recommend using the A/P account as the default account for the credit card vendor? That was what was confusing me, I had a separate liability account for each credit card. Your explanation is very helpful.
Pam
Pam,
Unless you need to see the credit card liability in separate GL accounts for some reporting purpose, there is no reason you can’t use just one GL Accounts Payable account for all your vendors. If you treat a credit card like any other vendor, then every transaction would be entered in the AP subledger and you’ll always have the correct balance and details under the individual vendor accounts.
-Victoria
I REALLY appreciate the work you have done! Great instructions for beginners in GP. PLEASE publish more like this on different topics
Thanks a lot!
Victoria,
Thank you for this detailed procedure. Is it possible to process purchase order receipts in the same manner?
Thanks,
Sam
Sam,
Once you have posted a Purchasing Invoice in GP, it’s treated just like any other AP invoice, so you can use the steps outlined under ‘Scenario 2′ to enter a manual payment using a credit card against the Purchasing Invoice. If you’re talking about just a Purchasing Receipt, without an Invoice, you cannot apply any payment to a Receipt in GP. What you can do in this case is enter an unapplied manual payment using a credit card, then apply it once the Invoice is matched to the Receipt and posted. Please let me know if I am not answering your question.
-Victoria
Victoria,
Can a Aged TB w/ Options report be used to also get a list of open amounts on the credit card vendors account? I am having trouble with getting right date range.
Thanks,
cal
Cal,
If you’re looking for a list of all unpaid transactions for a particular vendor, then you don’t need to add a date range…maybe that’s what is causing the issue? If that’s not what you’re looking for, can you be a little more specific? You can also get this list in SmartList, although it won’t be aged. Typically aging the payables is not a concern for credit card vendors, though.
-Victoria
Victoria,
I enjoy each and every word in this article.Really unbeatable article.This is the reason for your MVP awards(consecutively..).
I learn new things from your every post.
Thank you very much……………………….
-jeganeedhi
This is very informative and very nice of Victoria to publish such articles I encourage her to do more and this is the best.
Farooque.
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You know, I have to tell you, I really enjoy this blog and the insight from everyone who participates. I find it to be refreshing and very informative. I wish there were more blogs like it. Anyway, I felt it was about time I posted, I’ve spent most of my time here just lurking and reading, but today for some reason I just felt compelled to say this.