How to Record Credit Card Processing Fees in QuickBooks Online
Credit card processing fees are a common expense for businesses that accept credit card payments. These fees can often be confusing to record in your accounting software, such as QuickBooks Online. In this article, we will guide you through the process of recording credit card processing fees accurately and efficiently.
Step 1: Create an Expense Account
The first step is to create an expense account specifically for credit card processing fees. To do this in QuickBooks Online, go to the Chart of Accounts and click on “New.” Choose the “Expense” account type and name it something like “Credit Card Processing Fees.”
Step 2: Record the Fee as an Expense
When you receive your credit card processing statement, locate the fee charged for each transaction. To record this fee, select the “+” button on the top right corner of your QuickBooks Online dashboard and choose “Expense.” Fill in the necessary details, such as the date, payee (your credit card processor), and the amount. Select the “Credit Card Processing Fees” account you created in Step 1 as the expense account.
Step 3: Match the Fee with the Deposit
To accurately match the fee with the corresponding credit card deposit, you need to reconcile your bank account. Go to the “Banking” tab and select “Banking.” Locate the deposit related to the credit card transactions and click on “Match.” From the list of transactions, find the credit card processing fee and select it. QuickBooks Online will automatically match the fee with the deposit, ensuring accurate and balanced records.
Common Questions and Answers:
1. Can I record credit card processing fees as a cost of goods sold (COGS)?
No, credit card processing fees are considered an operating expense and should be recorded as such.
2. How often should I record credit card processing fees in QuickBooks Online?
You should record credit card processing fees whenever you receive your credit card processing statement or on a regular basis, such as monthly.
3. Can I create sub-accounts under the “Credit Card Processing Fees” account?
Yes, you can create sub-accounts to further categorize your credit card processing fees, such as by card type or specific payment processor.
4. What if I forgot to record some credit card processing fees?
If you forgot to record certain fees, you can go back and add them manually by following Step 2. Be sure to enter the correct date and payee information.
5. Do I need to record each individual credit card processing fee separately?
It is recommended to record each fee separately for accurate tracking and reporting. However, if you prefer, you can group them together as a lump sum expense.
6. How can I ensure that I am recording the correct fee amount?
Double-check your credit card processing statement for the exact fee charged for each transaction. It is also helpful to consult with your payment processor or accounting professional if you have any doubts.
7. Can I automate the recording of credit card processing fees in QuickBooks Online?
Yes, you can set up rules in QuickBooks Online to automate the categorization of credit card processing fees. This can save you time and ensure consistency in your accounting records.
8. Are credit card processing fees tax-deductible?
Yes, credit card processing fees are generally tax-deductible as a business expense. However, it is always recommended to consult with a tax professional to ensure compliance with tax laws.
9. Can I record credit card processing fees as a pass-through expense?
If you pass on credit card processing fees to your customers, you can record them as a separate line item on invoices rather than as an expense. This allows you to recover the fees directly from the customer.
10. What if my credit card processor bundles the fees with the deposits?
If your credit card processor provides a single deposit amount that includes both the transaction amount and the fee, you can record the fee as a negative amount in the deposit transaction to offset it.
11. Can I record credit card processing fees as a percentage of sales?
No, credit card processing fees are typically charged per transaction or as a flat fee. Recording them as a percentage of sales would not accurately reflect the actual fees incurred.
Recording credit card processing fees accurately in QuickBooks Online is essential for maintaining accurate financial records and tracking your business expenses. By following these steps and understanding the common questions and answers, you can ensure that your accounting is in order and that you are properly managing your credit card processing fees.