Hello Ira

You can post a cash receipt for that amount but post it to a check clearing acct (in the cash acct ran get) instead of your checking acct

Then issue payment against the vendor invoices from that same clearing acct.

But how would the cash receipt show as a payment in the client's account? Against which invoices in cash receipt would I credit? If I issue a credit in A/R debiting the clearing account, then the cash receipt applied to the credit would effectively wash the clearing account., leaving no debit amount to be used by accounts payable.

You would apply the receipt to whatever client invoice covered the vendor's work that you billed them for or their oldest invoice.  There is no credit issued to the customer in this scenario.

The solution should work as long as you know which client's invoice is credited in the cash receipts. But sometimes the client only notifies us that he used his credit card paying a lump sum amount (i.e. 50K) at our vendor (that way he gets Amex points) and we have no idea where he would like to apply the payment (he has 5 jobs with us). This creates a difficult scenario on how to report the transaction.

Well then I guess you can apply it to whatever invoice you see fit, or tell the client he needs to identify which invoice to apply it to when he calls to tell you he made a vendor payment.  Otherwise, don't post a cash receipt,  but instead enter an AR credit, invoice type 2=memo so it won't reduce the contract balance).  Then send him a statement showing the invoices and credits, and let him choose how/when to apply them.

Well then I guess you can apply it to whatever invoice you see fit, or tell the client he needs to identify which invoice to apply it to when he calls to tell you he made a vendor payment.  Otherwise, don't post a cash receipt,  but instead enter an AR credit, invoice type 2=memo so it won't reduce the contract balance).  Then send him a statement showing the invoices and credits, and let him choose how/when to apply them.