Four Steps to Handling Credit Card or PayPal Receivables
Part of running a business in 2020 is accepting multiple forms of payment and knowing how to do so. We’ll cover how to accept credit card and payment processors like PayPal or Venmo.
Step 1. Create a new bank account in QuickBooks and name it after the payment processor (like PayPal or Google Checkout). Set up multiple accounts for your convenience - one account for each merchant that processes payments for you.
Step 2. Once your payment is received, deposit it into the merchant account you created in Step 1. Do not deposit it directly into your checking account.
Step 3. Once the money shows up in your checking account, transfer the funds from your merchant account to your bank account. If you regularly accumulate funds in your PayPal or other similar account, it’s better to transfer the amounts randomly when needed.
Customer pays via CC or PayPal > Money hits Merchant Account > Money hits Checking Account
Step 4. To account for your fees and costs in your books, there are three ways to do so:
- If you typically get lump sum fees at the end of the month debited to your checking account, continue recording when you see the transaction posted in the account. There is nothing to do differently.
- If you use a payment processor like PayPal or Google Checkout, they show you how much they take as a processing fee via their transaction reports. At the time you make the transfer of the funds from the merchant bank account to your checking account in QuickBooks, make a withdrawal entry from your merchant account to account for the processing fees.
- If you’re using a more basic payment processor, you likely won’t receive regular daily reports, but rather monthly. Once you receive the monthly report, take the total cost of the processing fees they charged you, take it off the statement, and withdraw a lump sum from your merchant account to cover the fees. This is a good way to reconcile your accounts and make sure you received all the money from the payments. At the end of the month, after you enter the fees, the only thing that should be left in your account should be undeposited recent payments.
If you have questions about any of this, contact Skynar Bookkeeping for assistance.