• A customer is also a vendor and you need to pay them a net amount
• Apply AR against AP
• Apply a purchase invoice against a sales invoice to reduce the amount owed by the customer
• Apply a sales invoice against a purchase invoice to reduce the amount owed to the vendor
• Reduce the amount owed to a vendor by the amount of their purchase
• Reduce the amount owed by a customer by the amount of our purchase
• Barter or in-kind services

 NOTE: These steps assume that the vendor is already set up as a customer, or vice/versa. 

1. Record the purchase invoice from the vendor (for example, $200).
2. Record the sales invoice from the customer (for example, $75).
3. Create an AR receipt for the amount that will be applied to the vendor's invoice: Select Tasks, then Receive Money.
4. Create the receipt as normal (for example, for $75).
5. Instead of using a cash account, however, use a suspense account. This can be any account (the result will be no change in the balance), but you typically use a liability account.
6. Save the receipt.
7. Create a payment to reduce the amount owed to the vendor Tasks, then Payments.
8. Select the Vendor ID.
9. Enter a Check/Reference No. and Date.
10. Set the Cash account to the same suspense account as used on the receipt.
11. Check Pay on the line for the relevant purchase invoice.
12. Change the Amount Paid to match the sales invoice amount (for example, $75).
13. Select Save.
14. Create a second payment to complete payment on the purchase invoice.
15. Pay the remaining balance on the purchase invoice as usual.
16. Verify with the Aged Receivables and Aged Payables reports that the sales and purchase invoices have both been cleared.

 NOTE: If the vendor owes you more than you owe them, the steps are the same, but there will be 2 receipts and 1 payment. 

Alternate method:

This process can also be accomplished by applying credit memos to the sales and purchase invoices.

1. Apply a Credit Memo or Vendor Credit Memo to the smaller balance. (Example: If the customer balance is lower, create a Credit Memo to wash out the balance owed. If the vendor balance is lower, create a Vendor Credit Memo to wash out the balance owed).
2. Create a Credit Memo or Vendor Credit Memo to apply the same amount as the smaller balance against the remaining Sales or Purchase invoice. (Example: Apply the amount of the customer balance against the Purchase Invoice. Or, apply the amount of the vendor balance against the Sales Invoice).