Mark a bill as paid

This article explains how to record a payment that you've made to a supplier against a bill that you've added in FreeAgent. It also explains how to record a payment using personal funds or an advance payment to a supplier such as a payment on account or deposit.

To mark a bill as paid, you can either explain a bank transaction or enter a bank transaction manually.

If you’ve paid off more than one bill in a single payment, find out how to mark multiple bills as paid with one payment.

If a NatWest, Royal Bank of Scotland or Ulster Bank business current account is your primary bank account in FreeAgent, find out how to pay a bill or schedule a bill payment using Payit.

Explain a bank transaction

Once the relevant bank transaction for the supplier payment has been imported into your FreeAgent account via a bank feed or uploaded from a bank statement, you’ll need to explain it using the appropriate ‘Type’ and ‘Category’ as detailed below.

Navigate to the 'Banking' tab at the top of the screen and select 'Bank Accounts' from the drop-down menu.

Choose the relevant bank account from the list.

Select the transaction that relates to the supplier payment, select ‘Bill Payment’ from the ‘Type’ drop-down menu and select the relevant bill from the ‘Bill’ drop-down menu. Please note that ‘Bill Payment’ will only appear as an option if you have a bill which is open or overdue.

Select ‘Explain transaction’ to complete the process.

Enter a bank transaction manually

If you don’t have a bank feed enabled and you're not uploading bank statements, you can either add a bank transaction manually to the bill or in the Banking area of your FreeAgent account.

Adding a manual payment to the bill

Please note that this will add a manual bank transaction in your primary bank account in FreeAgent. Therefore, if you’ve not paid this bill from your primary bank account, don't use this option.

Navigate to the 'Bills' tab at the top of the screen.

Select the reference number of the relevant bill.

Select 'Add a manual payment'.

This will bring up a screen where you can enter a manual payment to pay this bill from your primary bank account, with the compulsory fields filled in for you. Choose which date you want the manual payment to be recorded in your accounts from the ‘Dated on’ field and select 'Create and Finish' at the bottom of the screen to complete the process.

Adding a manual bank transaction in the Banking area

Alternatively, you can add a bank transaction manually to any of your bank accounts in FreeAgent.

Navigate to the 'Banking' tab at the top of the screen, select 'Bank Accounts' from the drop down menu and choose the relevant bank account from the list.

Navigate to the ‘More’ button and select ‘Add transaction’ from the drop-down menu in the top-right.

Select ‘Bill Payment’ from the ‘Type’ drop-down menu, enter the date and the amount of the payment and select the relevant bill from the ‘Bill’ drop-down menu.

Select ‘Create and Finish’ at the bottom of the screen to complete the process.

Bill paid for using personal funds

If the bill was paid for using personal funds rather than from the business account, there’s two ways to reflect that you have paid the bill with your personal card. You can either record the cost as an out-of-pocket expense or enter manual bank transactions.

If you’re unsure which option to use, please ask your accountant.

Option 1: record the cost as an out-of-pocket expense

If you’ve already added a bill for the cost, delete the bill in FreeAgent and then add the cost as an out-of-pocket expense instead.

This will then show that the business owes you the money for paying the expense from personal funds. Please ensure you delete the bill if you added one to prevent double accounting for your purchase.

Option 2: enter manual bank transactions

Alternatively, you can enter the following two manual bank transactions dated the same date:

Sole trader

• Money in: ‘Type - Money Received from User’ > ‘Reason - Capital Introduced’
   
• Money out: ‘Type - Bill Payment’ > Select the bill you paid
   

Limited company

• Money in: ‘Type - Money Received from User’ > ‘Reason - Payment to Director's Loan Account’
   
• Money out: ‘Type - Bill Payment’ > Select the bill you paid

These will net each other off to show that you have paid money on behalf of the business to pay the bill.

Recording a payment on account to a supplier

To record an advance payment to a supplier, such as payment on account or deposit, you’ll first need to add a new bill to explain the payment on account against.

Then, add a bill credit note for the amount of the payment on account and when you are sent a new bill from the supplier in the future, you can net if off (cancel out) against the new bill.

This means the supplier, within the Contacts section of your account, will show the outstanding credit note balance which will be reduced as you use it against a future bill.