How to Account for Credit Card Processing Fees in QuickBooks
Managing credit card processing fees is an essential part of bookkeeping for businesses that accept credit card payments. QuickBooks, a popular accounting software, provides a simple and effective way to account for these fees. In this article, we will guide you through the process of recording credit card processing fees in QuickBooks, ensuring accurate financial records and streamlined bookkeeping practices.
Before we dive into the steps, let’s briefly understand credit card processing fees. When a customer pays with a credit card, a processing fee is charged by the payment processor or merchant service provider. This fee is usually a percentage of the transaction amount or a flat fee per transaction. It is important to account for these fees separately to accurately track your business’s income and expenses.
Now, let’s explore the steps to account for credit card processing fees in QuickBooks:
Step 1: Set up an Expense Account
To begin, you need to create an expense account specifically for credit card processing fees. This will help you track and analyze these fees separately from other expenses. To create a new expense account, follow these steps:
1. Open QuickBooks and go to the Chart of Accounts.
2. Click on “New” to create a new account.
3. Select the Account Type as “Expense.”
4. Choose an appropriate Detail Type, such as “Credit Card Processing Fees.”
5. Enter a name for the account, e.g., “Credit Card Processing Fees.”
6. Click on “Save and Close” to complete the setup.
Step 2: Enter Credit Card Sales
When entering credit card sales in QuickBooks, you need to ensure that the processing fee is recorded accurately. Here’s how you can do it:
1. Go to the “Sales Receipt” or “Invoice” window.
2. Enter the customer’s information, product or service details, and the total amount received.
3. Create a new line item for the credit card processing fee.
4. In the “Item” column, select the appropriate expense account you created in Step 1.
5. Enter the amount of the processing fee as a negative value (e.g., -3.00 for $3.00 fee).
6. Save the transaction.
Step 3: Reconcile Bank Deposits
When reconciling your bank deposits in QuickBooks, it is crucial to account for the credit card processing fees to ensure accurate bank balance reconciliation. Follow these steps to reconcile your bank deposits:
1. Go to the “Banking” menu and select “Reconcile.”
2. Choose the appropriate bank account and statement date.
3. Enter the ending balance from your bank statement.
4. Mark the deposits that match the transactions in your bank statement.
5. When you reach a deposit that includes a credit card processing fee, select the “Add New” option and enter the fee amount as a negative value.
6. Continue reconciling the remaining deposits and fees until you reach the ending balance.
7. Complete the reconciliation process.
Q1. Can I automate the recording of credit card processing fees in QuickBooks?
A1. Yes, you can automate the recording of credit card processing fees by using third-party apps or integrations that sync your payment processor data with QuickBooks. These apps can automatically record the fees as separate expenses.
Q2. How often should I reconcile my bank deposits in QuickBooks?
A2. It is recommended to reconcile your bank deposits in QuickBooks on a monthly basis to ensure accuracy and identify any discrepancies promptly.
Q3. Should I record credit card processing fees as an expense or a deduction from sales?
A3. It is generally recommended to record credit card processing fees as an expense. This allows for better tracking and analysis of your business’s expenses.
Q4. Can I customize the credit card processing fee account in QuickBooks?
A4. Yes, you can customize the credit card processing fee account in QuickBooks by adding sub-accounts or renaming the account to align with your business’s specific needs.
In conclusion, accounting for credit card processing fees in QuickBooks is a straightforward process that involves setting up an expense account, recording credit card sales correctly, and reconciling bank deposits. By following these steps and incorporating best practices, you can ensure accurate financial records, streamline your bookkeeping practices, and gain valuable insights into your business’s financial health.