How to Set Up Vendors in Quickbooks Pro Mac 2007

After a few hours talking with my accountant we both realized two things, my accounting is horrible and I need to do something about it.

Accounting has never been my strong suit, and probably never will, but there are a few simple steps that I've taken to make accounting for my business less of a chore and more of a short weekly routine.

The main problem I had was with my partners. Normally we would negotiate a pay scale that would leave me holding most of the tax burden. This wasn't to bad, but this year I was in a 36.5% tax bracket! So if I split profit 50/50 with my partner, I was only getting 13.5 percent of the profit, hardly a good deal.

When I talked with my accountant he suggested that I set my partners up as vendors in Quickbooks and send them a 1099 at the end of the year. This would allow them to claim the income earned on their taxes and would relieve me of their portion of the tax burden.

Here is an example. If my partner and I earn $10,000 in one month, under normal circumstances he would get $5,000 and I would get $5,000. I would pay taxes on the full amount which is approximately $3,650 leaving me with a net income of $1,350.

Under the new agreement, I only pay taxes on the $5,000 I earned which is $1,825 and that leaves me with earnings of $3,175! The difference in earnings is $1,825 per month!

Since this is obviously a fair way to split tax burden I immediately set out to find out how to do this in Quickbooks Pro 2007 (Mac Edition). At first it wasn't easy, but if you avoid my mistakes you can have a vendor set up in just a few minutes. Sharing tax burden has never been so fun!

First step is to open your Vendor list (Lists > Vendors). Create a new Vendor (Apple + N) and name that vendor. I just used my partner name. Also don't forget to put in the address, you'll need that for the 1099 at the end of the year.

Now that you have your vendor set up, you want to add a bill. This is the money you'll be sending to your vendor (or partner). To create a bill go to Vendors > Enter Bills.

Chose your partner as the Vendor, and put in the date and amount you'll be paying. For the account, you can use whatever account you have set up, as long as it is an expense account. I have one specially set up called "Business Costs".

Depending on how you have QuickBooks Pro 2007 set up, you can either go to Vendors > Pay Bills or wait until your normal bill pay cycle and the vendor bill will print at that time.

You're done! All you have to do now is at the end of the year go to Reports > Vendors & Payable > 1099 Summary. That will list all of the 1099 you need to send.

Now it's up to you, you can follow my few steps and have a vendor set up in 10 minutes, or you can take the full morning like I did and figure it out for yourself!