Credit Card Deposits in QuickBooks
Credit cards payments are normally not received by your bank until a few days after you’ve run the charge on the customer’s card. That means the credit card sales sit in your Undeposited Funds account until you get around to batching and depositing them to match the way they are received by your bank.
This process can be rather tedious and repetitive for organizations that receive credit card payments on a regular basis. Plus they tend to clutter up the Deposits window. Wouldn’t it be nice to get those credit card payments out of the way so when you go to record a deposit in QuickBooks, the only things you see in your Deposits window are the cash and checks that you are physically taking to the bank?
Solution to Simplify Credit Card Deposits
Create a bank account in QuickBooks called Credit Card Clearing. It’s not a real bank account; it’s simply a place to record credit card payments as you receive them. Now every time you receive a credit card payment, deposit it right away to the Credit Card Clearing account. This will keep the credit card payments pending deposit out of your Deposits window while accumulating a cash balance in the Credit Card Clearing account.
When you are ready to reconcile your bank account for the month, download or import all the bank transactions into QuickBooks. Code all the credit card deposits to the Credit Card Clearing bank account. The posted transactions will increase your regular operating bank account cash and decrease the amount in the Credit Card Clearing account. Any balance remaining in Credit Card Clearing should be the payments you received in the last days of the month that were not received by your bank until the following month.
Merchant Fees Deducted from Transactions
If the balance left in Credit Card Clearing is more than the undeposited payments, it may be because the merchant service provider is taking a fee out of each transaction. If this is the case, refer to the credit card statement for the total fees netted out of the payments for the month. Create a journal entry to reduce (credit) the Credit Card Clearing account for the amount of the fees with an offsetting increase (debit) to the expense account where you record bank and merchant fees. After this adjustment, the account should now contain the credit card payments received at month end that are deposited at the start of the new month.
With this process you never have to go through the tedious process of matching daily credit card receipts to the exact daily deposits as received by your bank. Instead, you are now batching credit card receipts on a monthly basis. Always verify that the cash recorded to the Credit Card Clearing account from credit card payments received in the last few days of the month is actually deposited into your bank account at the start of the new month. That way you know your system is staying on track.
Keeping Operating Cash Up-to-Date
If it bothers you that you’re not seeing cash from credit card payments in your bank account on your financial reports until you complete the monthly reconciliation, you could group the Credit Card Clearing account and operating bank account together under one parent account called Operating Cash. Then the total of the two accounts represents your operating cash.
As another option, you could also do a weekly import of activity to your bank. Most nonprofits we work with maintain a monthly bookkeeping cycle. QuickBooks Online makes constant downloading and importing of bank transactions easier which can facilitate keeping the books up-to-date on a daily or weekly basis. However for efficiency’s sake, reconciling and looking over the books monthly to make sure it all looks correct is a good idea.
Another option is processing credit card payments against invoices in QuickBooks Online using Intuit’s merchant processing service. The fees may be a bit more, but QuickBooks Online will match the credit card payments against the invoices you email to your clients and record the deposit and related fees for you. Then you don’t have to worry about how you batch credit card payments for deposit.
If you accept credit cards as a form of payment, consider how to make the accounting process as efficient as possible. As you can see, there are a few tricks you can use to make recording and reconciling credit card deposits easier!