Learn how to efficiently process vendor payments in Dynamics 365 Business Central. Master essential steps and best practices for accurate financial workflows.
Efficiently managing vendor payments is crucial for maintaining healthy business relationships and ensuring the smooth operation of financial processes. Microsoft Dynamics 365 Business Central offers a streamlined approach to processing these payments, allowing you to handle transactions with accuracy and ease. This guide provides a comprehensive overview of the essential steps and best practices for processing vendor payments within the system to help you optimize your financial workflows and maintain accurate records.
Vendor Invoices
Business Central provides a variety of ways to identify which invoices are due for payment. we'll start with the Unprocessed Payments fact box which is available on the Business Central home screen.
Selecting the Unprocessed Payments fact box provides you with a list of all open vendor invoices. The entries in red indicate overdue invoices.
A second option is the Aged Accounts Payable Report. This report allows you to view vendor invoices based on various aging criteria, including the aging date, aging method, length of aging periods, and additional options, such as displaying invoices that are overdue by a certain number of days. To access this report, select the Search button in your Application Bar and type Aged Accounts Payable into the search bar.
Then, select Aged Accounts Payable under Reports and Analysis.
To see a breakdown of individual invoices, enable the Print Detail option.
Select Preview to see the output for this report.
This is what the report will look like in preview.
Now that you've identified vendor invoices which are due for payment, let's look at how to process those payments.
Payment Journals
The Payment Journals page is used to create and process vendor payments in Business Central. You can access this page by clicking on the Cash Management tab in your Navigation Bar and selecting Payment Journals from the available menu options.
On this page, you can enter lines for each vendor you want to apply payments to. Each line can be linked to a single invoice or multiple invoices. To start, enter the vendor's Account Number.
Then, select Process and Apply Entries.
A list of open vendor invoices for the selected vendor will display. To apply invoices to the payment journal line, left-click in the Applies-to ID field to select the invoice in question.
Then, select Process and Set Applies-to ID.
Notice that the document number from the journal line is populated in the Applies-to ID field indicating that the invoice is now linked to the journal line. Repeat this process for any other invoices you want to include on the journal line.
If you are applying a partial payment, update the Amount to Apply field with the value you are paying.
When ready, click OK.
On the journal line, notice that the Amount field is automatically populated with the sum value of the selected invoice payments.
Confirm the information in the remaining fields is correct, such as the Payment Method Code, the Balance Account Type, and the Balance Account Number.
Before posting, let's take a look at the Bank Payment Type field. This field has four options. Computer Check is used if you're printing checks from Business Central for physical printing or email distribution.
Select Manual Check if you're using an external method to generate checks, such as handwriting checks. This method is also often used to record wire transfer transactions in Business Central.
Electronic Payment is selected if you are generating an electronic payment file, such as an EFT file
Finally, Electronic Payment IAT is used if you are generating an electronic payment file for the ACH format, which is commonly used for U.S.-based electronic payments.
After completing entry of the journal line, you can add additional lines for any other vendors that you want to create payments for. Let's take a look at a different way you can associate an invoice with a journal line. Enter a new line and select a different Account Number.
This time instead of using the Process, Apply Entries method, browse for and select a single invoice number. Locate the Applies-to Document Number field and select the ellipsis.
A list of open invoices will appear that is similar to the screen presented when using the Apply Entries method above. However, in this case, we are only selecting a single invoice. Left click on the correct line to select it. Then, click OK.
Notice that, again, the Amount field is automatically populated with the amount of the selected invoice.
Also, the Applies-to Document Number field has been populated with the invoice number that we have selected.
It should be noted that this method is only applicable when you want to associate a single invoice with a single journal line. To complete this line select the Bank Payment Type.
Let's look at a third way to select invoices for payment within the payment journal. From the Menu Bar, select Prepare Suggest Vendor Payments.
This screen presents you with a number of options for how Business Central can suggest vendor payments based on your selected criteria. For example, certain vendors may offer payment discounts for early payments, or certain vendors may be a higher priority for payment. If funds are limited you can also set default field values.
You can adjust the settings as needed or keep the standard settings and filter based on your selected vendor. Then, click OK when ready.
As you can see, Business Central has generated multiple lines corresponding to each open invoice for this vendor. If you prefer to group the invoices in a single journal line, you can enable the Summarize per Vendor option on the suggest vendor payment screen.
This time, a single journal line totaling the value of three invoices will be generated.
Fill in the missing field values and your line is ready.
Once all lines are complete, the next step will depend on your bank payment method. At this time, you may need to print your checks or export your EFT data. If you are using computer checks, you must print the checks before you can post. To do this, select Check and Print Check.
You will see some options for printing the checks, such as confirming the Bank Account, Last Check Number, Journal Template Name, and Batch Name.
When ready, click Print to generate the checks.
After printing the checks, the Check Printed field will be enabled for each line.
You are now ready to post. Select Post/Print and Post.
Now, the payment journal has been posted and the vendor payments have been processed.
Process Vendor Payments
Let's look at one final way we can generate payment journal lines we'll do this from the vendors page. Click on the Purchasing tab in the Navigation Bar and select Vendors.
Select the Vendor that you want to create a payment for.
Then, select Process and Pay Vendor.
A list of vendor invoices will be presented. Select the invoice you wish to pay. Then, select Process and Create Payment.
In the Edit Create Payment window, there are various options to confirm, such as the Payment Journal Template Name, Batch Name, Bank Account Type, and Payment Type. Click OK when ready to return to the Payment Journals page.
You can see that a line has been created from the invoice you selected. If you click on Process and Apply Entries, you will see that the selected invoice has been linked to the Payment Journal line.
Instead of using a Bank Payment method of Computer Check, you can also generate an EFT file. To do this, select a Bank Payment Type of Electronic Payment.
There are a number of requirements to set up EFT payments in Business Central that must be completed before you attempt to process vendor payments. To generate your EFT file, select Bank and then Export.
This will open the Export Electronic Payment screen. Review the options and fill in the details as required. Select OK when ready.
A remittance file will be created, be sure to hit Save. This remittance can be sent to vendors to inform them of the payment that you will be making via EFT.
Next, you need to generate the EFT output file. Select Actions and Functions and choose Generate EFT File.
On this screen, you will see a list of EFT entries that were created by the bank export function in the previous step. When ready, select Generate EFT Files.
A text file will be created based on the EFT Data Exchange Format that was configured. This file can be uploaded to an online banking service to process the actual EFT transaction, so, be sure to hit Save.
Finally, close the Generate EFT Files window to post the Payment Journal Batch. Select Post/Print and Post and the Payment Journal will be posted.
Training Video: How to Process Vendor Payments in Dynamics 365 Business Central
Having trouble processing vendor payments in Dynamics 365 Business Central? Feel free to get in touch with the team at Kwixand Solutions for expert assistance. Don't forget to subscribe to our YouTube channel for more Business Central training videos, and stay connected with us on LinkedIn, Facebook, Instagram, and Twitter for the latest updates.
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