Syncing Card Payments With QuickBooks Online

Why net deposits create a mismatch

Some processors send you the day's card sales with fees already taken off. Your invoices and sales records show the gross amount, and your bank shows the net. Illustrative example only, with made-up round numbers: customers pay $1,000 by card, the processor deducts $30, and $970 arrives in the bank. If you record $970 as income, sales are understated by $30 and the fee disappears from your expenses. If you record $1,000 without the fee, the books will not match the bank. The fix is to record both: $1,000 received and $30 of fees, netting to the $970 deposit. How you do that in QuickBooks Online depends on who processes your cards.

If you use QuickBooks Payments

Intuit's help article says QuickBooks Online automatically records deposits and fees deducted from QuickBooks Payments transactions. To choose the accounts, go to the Settings icon, then Account and Settings, open the Payments tab, and select your accounts in the Chart of Accounts section. Intuit says the deposit account should be the same account payments are really deposited to, and the same account fees are really deducted from. It also describes what happens when you use downloaded transactions: payments go into Undeposited Funds when processed, and once they settle and are deposited into your checking account, the batch deposit is recorded automatically along with a separate fee withdrawal in the fees withdrawal account.

If another processor pays you

Intuit's article for third-party merchant services sets out these steps. Select Create, then Receive Payment, enter the payment and apply it to the invoice, choose Undeposited Funds as the deposit-to account, and save. Next, select Create, then Bank Deposit, and tick the payment under Select Existing Payments. In Add other funds to this deposit, enter the fee the card company charged as a negative amount and choose the expense account you use for these fees. Check that the deposit total matches your bank statement, then save. Where one bank deposit covers several card payments, select each payment in that batch before adding the fee line. Your processor's statement or deposit report shows which sales and fees make up each deposit.

Matching the bank feed

Once the deposit total equals the amount on the bank statement, the downloaded bank transaction should match that single deposit. Avoid adding the downloaded line as new income as well, because that counts the same sales twice. If a deposit will not match, the usual causes are a payment left out of the batch, a fee entered as a positive amount, or a refund or chargeback taken from the same deposit. Our reconciliation guide covers matching batches to deposits in more detail.

Choosing the fee account

Intuit's steps say to use an expense account for the fee but do not tell you which one. IRS Publication 334 says that to be deductible a business expense must be both ordinary and necessary: an ordinary expense is common and accepted in your field, and a necessary expense is helpful and appropriate for your business. The publication lists bank fees among other expenses you may be able to deduct; it does not name card processing fees in that list, so ask your tax professional how to classify them. A dedicated account keeps the cost visible each month. Our bookkeeping guide covers tracking that cost.

Keep the records behind the entries

IRS Publication 583 says supporting documents such as sales slips, invoices, receipts and deposit slips support the entries in your books and on your tax return. It lists bank deposit slips and credit card charge slips among documents that show gross receipts. Keep each processor statement with the deposits it explains. The IRS says card payments you receive are reported on Form 1099-K; our 1099-K guide explains how to compare that form with your books.