I have a question related to properly entering credit card payments from customers into quickbooks.
We charge a convenience fee to pass along the credit card processing fee to our customers, so our customers are paying the invoice amount plus adding in an extra 2.25%.
We use" Quickbooks Payments Solutions", They accept the payment, take out 2.25% and deposit the net amount into our bank account. How should this be recorded in quickbooks? Should I only apply the net amount to the invoice, or the whole amount the customer paid and then some how subtract the fee and put it into a different account?
So there are really two questions here; one related to how the charges should appear on the invoice and the second is how the payment should be received/applied to said invoice.
Hi Kamilla
Questions first I'm afraid......is the business taking the fees supplying goods direct to the customer? (Just checking they aren't acting as an agent!), is your customer VAT registered? Do you always charge the exact same fee as your card provider or just 2.25% each time (Checking as often is percentage of sale based, rather than fixed). How does the charge show on your VAT invoices?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
First thank you very much for looking at my question.
We are plumbing and heating ltd company. Just recently we started taking credit card payments and we add 2.5% (fixed) on the total of the invoice. Our customers are not VAT registered since we provide domestic services( occasionally commercial).
Hi
Sorry, rushing between clients. When I said your customer, I assumed you were a bookkeeper with many clients. So is the company you work for VAT registered?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
The fee is both income and an expense (you are not passing on the charge, you are charging it yourself that it is passed on is purely incidental, it is income). You could either record the fee's seperately (for management reporting purposes) or include them in the the sale. Whichever way you go you must do so consistently.
It works very similar to PayPal in that you sell for x, the intermediary takes their cut, you get what remains. VAT is paid on the full original amount, the sale is the full amount including the fee's. The fee's are then shown in expenses.
On the VAT question (for you on all sales where you charge a fee) as noted above, for non financial services businesses Fee's are not exempt from VAT.
For reference on the VAT see section 4.7 of https://www.gov.uk/government/publications/vat-notice-70149-finance/vat-notice-70149-finance
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The fee is both income and an expense (you are not passing on the charge, you are charging it yourself that it is passed on is purely incidental, it is income). You could either record the fee's seperately (for management reporting purposes) or include them in the the sale. Whichever way you go you must do so consistently.
Yes, I agree that its expense and income at the same time. Would you mind guiding me through how this should be recorded in accounting software ?
It works very similar to PayPal in that you sell for x, the intermediary takes their cut, you get what remains. VAT is paid on the full original amount, the sale is the full amount including the fee's. The fee's are then shown in expenses.
Yes,that's right.
On the VAT question (for you on all sales where you charge a fee) as noted above, for non financial services businesses Fee's are not exempt from VAT.
For reference on the VAT see section 4.7 of https://www.gov.uk/government/publications/vat-notice-70149-finance/vat-notice-70149-finance
Hi Kamilla
Sorry just got back in a little while ago.
Cannot guide you without knowing - is the company you work for VAT registered? Then if they are - on the invoices to their customers do they include VAT on top of this 2.5% fixed fee?
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi Kamilla
I dont use quickbooks so there might be a quicker way of doing this and the terminology might be slightly different. Think of all your debits and credits and you might see a quicker route or a quickbooks user might show you one.
Essentially you are doing the following
Making a sale at say £1000, adding 2.5% fee on (£25) for the privilege of using a credit card = £1025 plus VAT = total invoice is £1230.
You HAVE to charge VAT on the amount you are charging the customer for using the credit card.
So that results in £1025 to sales, £205 to VAT control account and £1230 to debtors.
(Or better still, of the £1025 -key £1000 to sales nominal and £25 to 'Credit card charges income' or something similarly named
When client pays you will receive £1202.33 into the Bank via the merchant company, which represents £1230 paid by the customer LESS merchant companies fee of 2.25% ie £27.67.
Issue a credit note to the customer for £27.67 (DO NOT INCLUDE VAT as THIS charge by the merchant company does not attract VAT!) - NB YOU MUST key the credit note to the Credit card charges COST/expense account (in the same range as 'Bank charges').
This credit note will ensure the merchants charges are showing in the right expense account.
Then key the funds received to the Bank (£1202.33) and link to the original invoice (£1230) and the credit note (£27.67) to the customers account - which reduces the customer account/debtors to nil.
Do a backup first, check the accounts that will be affected (write down the balances), try it and see if it works as you expect it to do...if not you can at least then restore the backup.
Hope Ive not missed anything!!!!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
