We tend to buy from and sell to the same group of vendors, so it is not uncommon for us to each have approximately the same receivables balance against each other.
Lately I get requests from companies to "net out" transactions owed to each other. For example, if we owe them $18K and they owe us $19K, I get a request to have them issue a check for $1K and to net the transactions out. Does Quickbooks have any practical way to do this?
Not directly but it is possible.
Setup a new bank type account called "clearing". Next setup customer & Vendor IDs for these companies. Change the name slightly--I use "-C" and "-V" to keep the names unique. Now do your normal invoices and bills but run the payments through the Clearing account. This will clear the vendor/customer invoices as well as provide a clear paper trail on what has or has not been paid.
I almost understand, but let me describe in more detail and you can correct.
First, I would create a "virtual" bank account that is used to receive and pay these clearing transactions. This account would be given a balance of zero to start, and would always be required to carry a zero balance.
Second, I would "pay" our Bill Payments to be netted through this virtual account, and I would "receive" funds for the customer invoices due to this same virtual account.
Third, the final step is reconciling the net balance. The easy case is when we are owed money, and I can implement this simply by "transferring" funds from the virtual account to our real bank account. In effect we would document an incoming wire or ACH for the net amount as being a transfer from our "virtual" bank account, carefully cross referencing to the actual transactions and vendor who made payment.
The harder case is when we owe the vendor money. In this case part of one or more invoices is paid by our check or wire or ACH. The remaining balance on those invoices is paid by the virtual acccount.
Doing things this way I would not need to create any special customer or vendor IDs, which greatly simplifies administration of this scheme since no one would want to back out which vendor name is used on Bills, Item Receipts, and Purchase Orders that are all linked to each other.
Step two is the only time you should be using the vitual account. Any transactions that actually involve cash transactions should use the real bank account only.
In effect we
Special ID's are to be used when the customer and vendor are the same (i.e. you buy from ABC Comapnay and you sell to ABC Company).
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