Payables Return transactions in Dynamics GP

There is a little known, but very useful transaction type in the Payables module called Return.  Every few weeks or so I see a question in the newsgroups or a call comes in from a customer where the answer is to use the Payables Return transaction. 

A typical scenario where a Return is needed goes something like this:  You receive a check from one of your vendors for a rebate or an overpayment.  You either didn’t know it was coming or have not recorded the credit memo yet.  So now you need to record the fact that you got cash, you have a lower expense and it would be nice at the same time to record this under the vendor, so that you can see a history of this together with all the other transactions for this vendor. 

The Return transaction is perfect for this scenario because it will accomplish everything we want to with one transaction.  No need to enter a credit memo and debit memo in Payables and a separate Bank Transaction to record the receipt of money.

Below I will walk through the steps of entering a Payables Return in GP 10.0, however the steps are identical in earlier versions of Dynamics GP.  Please click on the screen shots to see them larger/clearer.

Start by going to Transactions > Purchasing > Transaction Entry and changing the Document Type to Return.  Enter the Doc Date, Vendor ID, Document Number and any of the other optional fields you’d like to use.  Enter the amount you received from the vendor in both the Returns field on the left and one of 3 payment fields on the right, typically this is Check, but it could also be Cash or Credit Card if that’s how the vendor returned money to you.  In my example I will enter the receipt of a check:

When you tab off the payment amount you’ll get the Payables Check Entry pop up window, make sure to chose the checkbook where this check will be deposited, in this case I will be depositing this vendor’s check to the FIRST BANK checkbook:

[Note: the check number entered above is the vendor's check number, similar to how you would enter a customer's check number on a Cash Receipt in Receivables.]

Next, click on Distributions to make sure they are what you want.  The cash account linked to your Checkbook ID will default here with a debit for the CASH distribution type and the Return amount will show as a credit for the PURCH distribution type.  (There is no RETURN distribution type in payables.)  The PURCH account(s) will default from the Purchases account(s) set up for this vendor, but you can change them as needed, just like on a payables invoice.  It is important not the change the Cash account, as that will cause an issue with your bank reconciliation.

Notice there is no distribution for Accounts Payable.  This is because we’re not actually entering any change to what we owe this vendor or what the vendor owes us, so the Return transaction will record everything we need and keep history for this under the vendor without actually changing their AP balance. 

Once you post this Return transaction Payables inquiry windows will show a transaction with a type of RET - this transaction will be moved to history automatically as soon as it posts, since it’s fully applied right away:

And you will have a new Receipt waiting to be deposited in the Bank Reconciliation module:

This can now be deposited together with any other cash receipts, payables returns or bank receipts.

As easy and straightforward as the Return transaction is, there are a few times when it may not be the right answer.  I am sure there are others, but the typical times when not to use a Payables Return are:

• When you have already entered a credit memo for the vendor.
• When you need to enter the return of inventory items.
• When the money you are receiving is not from a vendor.