When you are adding transactions to QuickBooks and you’ve paid or received money from a new source, QuickBooks prompts you to add the new source. It gives you the option to add this person or business as a Vendor, Customer, or Other Name. So what’s the difference?
Generally speaking, anyone you pay money to should be added to QuickBooks as a vendor. For example, you may receive goods or services from a person or business, pay a subcontractor to do work, or pay commission to a sales rep. All of these transactions should be recorded to a vendor.
Generally speaking, anyone you sell goods or services to and receive money from should be added to QuickBooks as a customer.
So why is Other Name even an option? Many small businesses will never need to use anything other than vendor or customer, but there might be times when you want to track other types of information not directly related to paying or receiving money. A common example of this is if you want to track sales by sales rep or location, then you might consider setting up each sales rep or location as an Other Name. That will allow you to run reports where sales are separated out by the Other Name coding. However, if you later pay commission to sales reps, they should be set up as vendors (or employees) as well. Also keep in mind that reporting for Other Names is not as robust as reporting for Customers and Vendors so you might lose some reporting capabilities if you incorrectly set up Vendors or Customers as Other Names.
Can a business or person be more than one type of contact in QuickBooks? Yes! As an example, there are times when you use a customer as a vendor. Maybe an office cleaning company has a customer that sells air conditioning units. That air conditioning business is a customer of the cleaner but if the cleaner used them to replace their old A/C unit, they would be a vendor of the cleaner as well. In this instance, just set up the air conditioning company in QuickBooks with the same name but differentiate the vendor entry by ending it with (v) and the customer entry by ending it with (c).