Bills & What You're Owed: Money That Has Not Moved Yet
Your bank balance tells you what happened. It says nothing about the invoice due next week or the $12,000 a customer has owed you since March. This guide covers both directions — the bills you owe and the money owed to you — and the reports that make both visible before they become a problem.
Why Both Sides Matter
Businesses that fail while profitable almost always fail here. Profit is earned; cash is collected — and the gap between the two is exactly what these two lists measure.
Recording bills and invoices when they are issued, rather than when they are paid, is also what makes accrual reporting possible. Without them, your books only ever know about money that has already moved.
Vendors
A vendor is anyone you buy from and owe money to — suppliers, subcontractors, the landlord. Setting one up once means their bills, payment terms and history are grouped together instead of scattered across transactions.
The grouping earns its keep at year-end. When you need to know what you paid a subcontractor across twelve months — the question behind every 1099 — a vendor record answers it in one place.
Bills and Their Statuses
A bill is money you owe that has not been paid yet. Each one moves through these states:
Draft
Entered but not yet part of what you owe.
Pending
Owed and waiting to be paid. This is what sits in accounts payable.
Overdue
Past its due date and still unpaid.
Paid
Settled. It leaves payables.
Canceled
No longer owed — a duplicate, or a bill withdrawn by the vendor.
Bills a vendor sends you for approval carry their own workflow — pending, approved, then paid — so a bill can be checked by whoever should sign it off before it becomes a payment anyone makes.
What You Are Owed
The mirror image. An invoice you send moves from Draft to Sent to Paid, or is Canceled. Everything sent and not yet paid is your accounts receivable — and Who Owes You is that list.
Sending and getting paid for invoices, including how online payment and processing fees work, is covered in Invoicing & Payment Fees.
Reading an Aging Report
Aging reports take those lists and bucket them by how overdue each item is — current, 1–30 days, 31–60, 61–90, over 90. Both directions have one: A/R Aging for what you are owed, A/P Aging for what you owe. Each comes as a summary for the totals and a detail for the invoice-by-invoice list.
The buckets are the point. A total receivable of $40,000 means nothing on its own; the same $40,000 mostly sitting past 90 days is a different business entirely. Collection odds fall sharply with age, which is why the report is bucketed rather than summed.
If an aging total ever disagrees with your balance sheet, the Subledger Tie-Out report exists to find the difference. See Financial Reports.
Where to Find It
Business owners
- Expenses → Vendors and Expenses → Vendor Bills
- Sales → Who Owes You (A/R)
- Reports → Financial Reports for the aging reports
Tax professionals — open the client, then Bookkeeping → Invoicing (A/R) and Bookkeeping → Vendor Invoices (A/P).
Frequently Asked Questions
Do I have to enter bills, or can I just categorize the payment?
If you pay everything immediately, categorizing the bank transaction is enough. Enter bills once you have suppliers giving you terms — otherwise your books cannot tell you what you owe until after you have paid it, which is exactly the wrong time to find out.
I entered a bill and it is showing twice.
Almost always the bill was entered and the bank payment categorized as a fresh expense. Paying a bill should settle the existing bill, not create a second one. Cancel the duplicate and match the payment to the original.
A customer will never pay. What do I do?
Leaving it in receivables forever overstates what your business is worth. Writing it off is a real accounting decision with tax consequences, so raise it with your accountant rather than deleting the invoice — deleting also erases the record that the work was done.
Does any of this show on a cash-basis report?
Not until money moves. Unpaid bills and unpaid invoices are invisible on cash basis by definition — which is precisely why the aging reports are worth running even if you file on cash.