I have a customer who has an invoice from us to pay, he would like to pay off our vendors for us as his payment to us. How in the world does that work in QB?
I must show my vendor as paid. But this transaction will not show through my bank or credit card and I must show a payment from my customer that also will not be reflected in any statement from bank or credit card. Oh Boy.

This type of transaction can be handled in QuickBooks easily. You create a Bank account and name it Trades or Bartering. Next, create an Item (other charge) named Trade/Barter and use the new bank account as it's account to post to. Open the customer's invoice and enter a memo describing how this invoice is being paid, using the description lines below the transaction details. This helps if someone else looks at the transaction later. Save and close the edited invoice. Next, create a Credit using the Trade/Barter item for this customer for the amount that they will be paying your vendor. If it is the exact amount of the invoice, then it will pay and close the invoice. If not, it will be applied to the invoice and the invoice will close after all payment is received. Last step is to create a credit memo for your Vendor using the new Trade/Barter Item for the same amount as the credit for your invoice. The two items will offset each other in the Trade/Barter Bank account and each of the credits will pay the outstanding invoce to your vendor and the outstanding receivable from your customer.