How can I prepay a vendor in Accounts Payable?

Setup:

In GL, create a Vendor prepayment account. (optional)

Workflow:

1. Enter a prepayment invoice in order to cut the check to prepay the vendor. Use the Vendor prepayment account as the expense account on this invoice.
2. Enter a credit memo invoice (enter amount as a negative) to reflect that the vendor was pre-paid. Use the Vendor prepayment account as the expense account on this invoice. You will be able to track these open credit invoices on the vendors to know who has been prepaid.
3. When you receive the invoices that are to use the prepayment, enter them as you normally would, coding to the appropriate expenses.
4. Record a $0.00 check and use the credit invoice against the invoices to pay them.

TIP: If you have a balance in the Vendor prepayment account, then you'll know that either step1 or step 2 was not completed. After these two steps, the Vendor prepayment account should have a 0.00 balance.