How to Process Vendor Payments in Dynamics 365 Business Central

Processing vendor payments in Dynamics 365 Business Central is a useful payments processing functionality for Accounting and Finance teams, but it does have some quirks and common challenges.

In this article, I’ll show you how to process vendor payments and give you troubleshooting tips for issues I often see clients run into, like voiding the check after the vendor payment has been processed and how to handle the Suggest Vendor Payments functionality.

How to Process Vendor Payments

Once your Vendor Invoices have been posted, the next step in the Accounts Payable module is to pay off the vendor.

To do so, Business Central has provided a dedicated window for processing vendor payments. The same rule can be applied when processing AR payments but, in this article, we will only cover AP payments.

1. Navigate to Payment Journals

From your Business Central home screen, select “Cash Management” and navigate to the “Payment Journals”. If the Cash Management option is not present, open “Payment Journals” through search.

Screenshot in Business Central highlighting "Cash Management" and "Payment Journals".

2. Select or Create Batches

Once you’ve navigated to Payment Journals, you will see an option to select or create your own batches.

Batches are used to group and manage various types of entries. They facilitate multiple users posting vendor payments using the Payment Journal, each user can have their own batch to avoid overlapping transactions. For example, EFT transactions can be consolidated into one batch, and if two users are working on EFT transactions, they can create separate batches.

By default, Business Central provides three different batches in the Payment Journal window.

  1. CASH
  2. GENERAL
  3. PMT REG

You can edit the name and description or create new batches.

  • To edit batches: click on “Edit List” as shown in the image below. This allows you to edit the name and description, and default Bal. Account Type/No. for a given batch.
  • To create a new batch: click on “New” and enter a new name and description.
Screenshot in the "Payment Journals" window highlighting the Batches, and the "New" and "Edit List" buttons.

Pro Tip: To save time and to use your batches effectively, try to default “Bal. Account Type,” “Bal. Account No.” and “No. Series” columns in Payment Journal.

Defaulting these columns allow the information to automatically populate for each transaction in that batch. Therefore, the user will not need to select this information each time for each entry.

Screenshot in "Payment Journals" highlighting the “Bal. Account Type,” “Bal. Account No.” and “No. Series" columns.

3. Apply Payment Entries

Once you have made the required changes to the batch, or setup a new batch, open the batch by clicking on the batch Name.

From here, you have two options:

  1. Manually enter your payment transactions.
  2. Allow Business Central to automatically generate the entry.

Option 1: Manually Entering Payment Entries

Make sure the following fields are entered and that the right information has been selected:

  1. Posting Date – Work date/Today’s date.
  2. Document Number – BC can automatically define this number, or the user can manually enter this number as well.
  3. Document Type – Payment
  4. Account Type – Vendor
  5. Account Number – Vendor Number
  6. Currency Code – Leave empty if the transaction is in the local currency code.
Screenshot inside a Batch highlighting the required fields to populate including: Posting Date, Document Type, Document No., Account Type, Account No., and Currecny Code.

Once you’ve entered the correct information, click “Home” in the header and then click “Apply Entries.” By doing this you are now able to apply your payment entry against your posted invoice.

After clicking on “Apply Entries,” you will see all the posted invoices for the selected vendor.

Screenshot of all posted invoices for a selected vendor.

Click on the “Applies-to ID” column of the posted invoice row to select it for applying the payment. Then, click on “Set Applies to ID.”

Screenshot highlighting the “Applies-to ID” column of the posted invoice row and “Set Applies to ID.”

To select multiple rows at a time and apply payment against them, click on the three dots next to the first column, click “Select More,” specify the desired rows, and then click “Set applies to ID.”

Screenshot in the vendor entries window highlighting the three dots next to the first column and "Select More" action. Screenshot in the vendor entries window highlighing the entries selected and pointing to "Set Applies- to ID" button.

Once you click “Set Applies to ID,” Business Central will automatically apply your payment entry document number against these invoices. From here, press OK to go back and apply these changes.

Once these changes have been applied, the amount column will be automatically populated, and a check mark in the Applied column will signify that your payment entry has been applied against an invoice.

Screenshot in the "Payment Jounrals" highlighting the "Amount" and "Applied" columns.

Notice in the image above that the “Bal. Account Type” and “Bal. Account No.” have been pre-defaulted by Business Central for this entry. The reason for this is (as discussed in step 2) we had defaulted this information on the batch itself.

If this information is incorrect, then make sure the correct bank account has been selected.

Next, preview the entry before posting to make sure the GL entry is correct and then post the entry and print the report (if required) or only post.

Screenshot in "Payment Journals" highlighting "Home", "Post" and "Preview Posting".

If the preview posting looks correct, you can post your entry.

Option 2: Auto Payment Entry Generation and Applying Against the Invoices

Option 1, manually entering payment entries, was to show the users how to manually specify and apply the entry against the invoices.

But in situations where we have to create multiple payment entries, the manual option is very time consuming. Therefore, we can use the auto option from Business Central to save time.

Start by clicking on “Prepare” and then “Suggest Vendor Payments.”

Screenshot inside "Payment Journals" highlighting "Prepare" and "Suggest Vendor Payments".

Click “Show more” to view all the options.

Screenshot of the "Suggest Vendor Payments" window highlighting "Show more".

Suggest Vendor Payments options:

  1. Last Payment Date – In this field, select the date either on or after the due date of your posted invoices. For example, if a posted invoice had a due date of Dec 20/2023, I could specify the date as Dec 20th or any date after this. This option helps us include the invoices for payments accordingly.
  2. Summarize Per Vendor – If there are more than two posted invoices for the same vendor, this option helps to consolidate them into a single line rather than having two separate lines for the same vendor.
  3. Posting Date – Enter the posting date for when you would like to post the transactions.
  4. New Doc. No. Per Line – Activate this field. This allows you to have a new document number for every individual line.
  5. Account Type – Set this to “Bank Account,” since we are making vendor payments.
  6. Account No. – Select the correct bank account card.
  7. Bank Payment Type – This field allows us to select whether our entry type is a check or an electronic payment.

Pro Tip: Business Central allows us to filter vendor entries based on various parameters and specify a list of vendors for recording payment entries.

We can filter our Vendor Invoices through different categories like, “Vendor No.,” “Payment Method Code” etc.

Note: There are advanced filtering options/formulas that we can use to enhance our filter options. For assistance on adding advanced filtering options, please reach out to us.

Screenshot in the "Suggest Vendor Payments" widnow highlighting the "Filter: Vendor" options.

Once all information has been selected, press OK.

In the image below, notice that Business Central has automatically added all these payment lines and applied our invoices against them. Therefore, all manual work has been eliminated.

Screenshot inside "payment Journals" highlighting all payment lines with invoices applied. Screenshot inside the "Payment Journals" highlighting the "Applied" checkboxes.

Before posting these entries, I recommend going through the applied invoices for each payment line, to make sure the correct invoices are linked against the payment entry.

If you are using “Suggest Vendor Payment” for the first time, always make sure to go through the applied entries.

To review the applied entries against the payment transactions:

Click “Applies to Doc. No.” and click on the three dots.

Screenshot in the "Payment Journals" highlighting the three dots in the "Applies-to Doc. No." column.

Another option that you can use is to select the payment line for which you want to check the applied invoice entries, click “Applied Entries.”

Screenshot in the "Payment Journals" highlighting "Home", "Apply Entries" and the row chosen to apply invoice entries.

In the image below, notice that four invoices have been applied against this entry.

If there’s any entry that you do not want to include in this list, delete the document number from the “Applied to ID” column for that entry and press OK.

Screenshot of "Apply Vendor Entries" highlighting the "Applies-to ID" column.

Pro Tip: Sometimes, you may not want to pay the entire invoice amount but only a specific part. To do that, scroll to the right, and in the “Amount to Apply” column, specify the value you want to apply against your payment entry.

Screenshot of "Apply Vendor Entries" highlighting the "Amount to Apply" column.

Press OK, and now you can preview and post the entry.

Learn more about useful payments processing functionality in Dynamics 365 Business Central:

Please contact us for tailored advice on how to best leverage Dynamics 365 Business Central for your business.

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