How do we keep track of a vendor bill we are paying in parts?

Keep three numbers on every bill: the bill total, what you have paid, and the balance. Record each payment against the bill with its date, method and reference. The bill stays open until the payments add up to the total. The mistake to avoid is typing the first payment in as the bill amount, which makes the remaining balance vanish from every report.

What is a short bill?

A vendor bill for less than what you received. It happens when a vendor bills the first shipment of a split order, misses a line, or bills late. It looks like good news. It is usually a liability you have not seen yet, because the vendor will often bill the rest later.

What does received but not billed mean?

Goods that arrived in your yard that no vendor bill covers yet. You do not owe a bill that does not exist, but you will probably owe it. Keep a list of these so the owner knows what is coming and so the next bill from that vendor can be checked against it.

Does it matter whether we use cash or accrual accounting?

It changes when an expense counts. IRS Publication 538 explains that under the cash method you generally deduct expenses in the year you pay them, while under an accrual method you generally deduct them when the liability is fixed and economic performance has occurred. Which method your company uses, and how a partly paid bill is treated, is a question for your accountant.

Can Traffic OS pay a vendor bill in parts?

Yes. Each payment is recorded against the bill, the balance stays on the unpaid-bills report until the bill is paid in full, and goods received but not yet billed are listed on the same report, separately from what you owe.

Paying Suppliers in Parts Without Losing Track of What

Accounts payable for a small traffic control company: how partial payments, short bills and goods received but never billed make a balance disappear, and the weekly routine that keeps it visible.

Here is how a supplier balance disappears. A sign shop sends a bill. Cash is tight because a general contractor is sixty days late, so the office pays part of it and plans to pay the rest after the next customer check clears. The payment gets typed into the books as the amount of the bill. The bill shows as paid. The rest of the money is still owed, and no report anywhere says so.

Months later the sign shop calls about the balance, or stops extending terms, or a new office manager finds a statement nobody can reconcile. None of this was fraud. It was a partial payment recorded as a full one.

Why partial payments are normal in this trade

Paying suppliers in parts is not a sign of a badly run company. In traffic control it is routine, for a few reasons.

Customer money arrives late and in pieces. Public work pays on its own schedule, and retainage holds back part of each payment until the job closes. Your payables feel that timing directly. We covered the customer side in retainage and cash flow on traffic control contracts.

Part of the bill is disputed. Twenty drums came damaged. You pay for what arrived in good condition and hold the rest until the credit memo comes.

The order arrived in pieces. A device order often ships on more than one truck. You may pay for the first delivery before the second arrives.

The vendor agreed to a payment plan. Larger purchases, such as a trailer-mounted sign or a truck-mounted attenuator, are sometimes paid over several months by agreement.

Each of these is fine. The risk is only in how it is recorded.

Three numbers on every bill

Every vendor bill should carry three numbers, always visible together:

Bill total. What the vendor says you owe for this bill. This number comes from the vendor's document and changes only when the vendor sends a corrected bill or a credit.
Paid. The sum of every payment applied to this bill.
Balance. The difference. The bill is open until this reaches zero.

Each payment is its own record with a date, an amount, a method (check, ACH, card) and a reference such as a check number. Two payments of half the bill are two records, not one edited number.

The IRS describes what supporting documents for an expense should show: they "should identify the payee, the amount paid, proof of payment, the date incurred, and include a description of the item purchased or service received" (IRS, What kind of records should I keep). The same page lists canceled checks or other proof of electronic payment among those documents. When a bill is paid in parts, keep the proof for each part. One check stub for a two-payment bill leaves half the record missing.

Short bills are not good news

A short bill is a vendor bill for less than what you received. It happens when the vendor bills only the first shipment of a split order, misses a line, or simply bills late. It looks like a saving. Usually it is a bill that has not arrived yet.

The usual sign is a receipt with no matching bill line. You counted 300 cones into the yard against an order, and the bill covers 200. Before you pay, ask the vendor whether a second bill is coming for the rest. Write the answer on the order.

If you pay the short bill and close the order, the next bill for those 100 cones arrives with nothing to match it against. Someone either pays it without checking or spends an afternoon proving the cones came. Neither is a good use of the office.

Received but not billed

The cleaner name for this is goods received but not billed: things that are physically in your yard that no vendor bill covers. Accountants track it because it is a real obligation that has not shown up as a bill.

You do not owe a bill that does not exist, and the list should not be added to what you owe. But it should be visible, for three reasons:

It tells the owner what is coming. A large received-but-not-billed balance from one vendor is a cash need next month.
It makes the next bill checkable. When that vendor's bill arrives, you already know what it should cover. This is the receipt half of a three-way match.
It catches vendors who never bill. Occasionally a vendor simply forgets. Whether you remind them is a business decision, but you should know it happened.

Cash or accrual changes when it counts

A partly paid bill can straddle two months or two tax years, so the accounting method matters. IRS Publication 538 explains the difference. Under the cash method, "you deduct expenses in the tax year in which you actually pay them." Under an accrual method, you generally deduct a business expense when "the all-events test has been met" and "economic performance has occurred" (IRS Publication 538, Accounting Periods and Methods).

Practically, that means a bill paid half in December and half in January can show up differently in your books depending on the method. Which method your company uses, and how your accountant wants partial payments and goods received but not billed handled at year end, is their call. The job of the payables routine is to give them clean records: every bill, every payment, every date.

A weekly payables routine

Fifteen minutes on a fixed day is enough for most small companies:

Open balances, oldest first. Every bill with a balance above zero, with the vendor, the bill date and what has been paid. Anything that has sat untouched for a month gets a decision: pay, dispute, or call the vendor.
Received but not billed. Every delivery with no bill. Anything large, or anything older than a few weeks, gets a call.
Flagged bills. Any bill that did not match its order, waiting for someone to explain the difference.
Payment plans. Any agreed schedule, with the next date due.

Put the reference on every payment you send. A vendor applying your check to the wrong invoice is the other common way balances drift, and a bill number on the stub prevents most of it.

How Traffic OS keeps the balance visible

In Traffic OS purchasing, a received purchase order becomes a vendor bill, and a vendor bill can be paid in parts. Each payment is recorded against the bill, and the balance stays on the unpaid-bills report until the payments cover the total. Goods received but not yet billed are listed on the same report, separately from what you owe, because no bill exists for them yet.

The profit and loss report in the reports can be read on a cash or an accrual basis, so you can see both views while your accountant decides which one counts.

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Paying Suppliers in Parts Without Losing Track of What You Owe