37: Record Credit Card Transactions Correctly In QuickBooks Whether You Are Starting A Business, Yo
Recording credit card transactions in either QuickBooks Desktop or QuickBooks Online is pretty easy to do as long as you have the correct procedures in place to do it accurately. Over the years, I have seen many different ways businesses have recorded their transactions and how quickly their financial reports can reflect inaccurate data. Most times when I walk them through the correct way to record these transactions, they are amazed at how simple and accurate it can be. In today’s episode, I am going to walk you through one of the best processes for recording your credit card transactions and making payments in your QuickBooks file all the way through saving your receipts and reconciling your credit card statement to ensure you have all your transactions accounted for. I am going to also mention a few of the ways that I have seen businesses record their transactions so that you can see if you would benefit from this new process in your business. Listen in today if you are tired of struggling to record your credit card transactions and you are looking for a solution to make it simple and accurate. This episode is perfect for you if you are if you are getting ready to start your small business, you’re a solopreneur, entrepreneur, small business owner, virtual online bookkeeper or virtual assistant and you are either looking into or already using QuickBooks Desktop or QuickBooks Online…
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Show Notes:
Recording credit card transactions in either QuickBooks Desktop or QuickBooks Online is pretty easy to do as long as you have the correct procedures in place to do it accurately. Over the years, I have seen many different ways businesses have recorded their transactions and how quickly their financial reports can reflect inaccurate data. Most times when I walk them through the correct way to record these transactions, they are amazed at how simple and accurate it can be. In today’s episode, I am going to walk you through one of the best processes for recording your credit card transactions and making payments in your QuickBooks file all the way through saving your receipts and reconciling your credit card statement to ensure you have all your transactions accounted for. I am going to also mention a few of the ways that I have seen businesses record their transactions so that you can see if you would benefit from this new process in your business. Listen in today if you are tired of struggling to record your credit card transactions and you are looking for a solution to make it simple and accurate. This episode is perfect for you if you are if you are getting ready to start your small business, you’re a solopreneur, entrepreneur, small business owner, virtual online bookkeeper or virtual assistant and you are either looking into or already using QuickBooks Desktop or QuickBooks Online…
Welcome Back…When I mention recording your credit card transactions in QuickBooks, do you start to cringe a little bit? Is it because you are unsure if the way you are recording your transactions is correct…or have you just held off recording these transactions because you are unsure how to do it and you don’t want to mess up your books? Well, if you are not recording these transactions, I’m sorry to tell you that your financial reports are already inaccurate since you are missing this valuable information. Today I am going to go over the process for recording credit card transactions that seems to work best for most businesses. Not only will you walk away with how to record your transactions correctly, but you will also learn the best way to record payments to your credit card account and how to reconcile your credit card statement to ensure you are accounting for every single transaction…and some tips on how to keep your credit card receipts.
First, I am going to start off with mentioning how I often see credit card transactions being entered. I have seen many times where the only way credit card transactions get recorded is when there is a payment made to the credit card account. I will say that if you consistently pay off your credit card balance in full, this option may work for you, but if you consistently have a balance on your credit card account, which many businesses do, then this process starts to get difficult to track which expenses are being paid and how and when to record them. Let’s take for example you have a credit card payment of $500 you are making. This will pay off your credit card balance and you know exactly what is making up the $500 that you are paying by looking at the credit card statement. It may be office supplies, telephone expenses, etc., but you know exactly how to categorize each dollar of that $500 payment. Next, let’s say you are making a payment of $500, but in this scenario, you have a prior balance of $1000 already on your account, and this month’s transactions equal a total of $200. In this case, you would need to go back to your prior statements to see where the $500 of expenses came from so that you can categorize them correctly…and then, what about the $200 worth of new charges? This is where it gets really complicated, and that’s exactly why I want to share a better process for you to record your credit card transactions in either QuickBooks Desktop or QuickBooks Online.
You will want to make sure that you have the appropriate credit card account or accounts set up in your chart of accounts. You can view your chart of accounts by “type” and see if you have any credit card accounts set up. If you don’t already have your credit card set up in your chart of accounts, you will need to add it. When you add this new account, make sure that you name your account with something you will be able to recognize…especially if you have more than one credit card account. I recommend adding the last four digits of your credit card to the name, such as Credit Card 1234. You will also want to make sure you have this new credit card account set up as a “credit card” type. You will see this as an option when you are setting up your account.
Now there are a couple of options to recording your credit card transactions depending on if you are using the bank feeds in QuickBooks or not, but I recommend you record each of your transactions whether you are using the bank feeds or not. So, the next step would be to record each and every credit card transaction into your QuickBooks file. If you are using QuickBooks Desktop, you can do this by clicking on the Banking tab on your top menu bar and selecting enter credit card charges. If you are using QuickBooks Online, you will click on the + New button and select Expense. For each of these options, you will select the credit card account that the transaction is coming from and then proceed to enter the payee, date, amount, etc. You can also upload a copy of your receipt if you would like and then save and close your entry. When you record transactions like this, you will be increasing the amount you owe on your credit card account. One of the main benefits to recording your credit card transactions this way is that you are able to look back by each vendor to see your purchase history.
If you are using bank feeds in QuickBooks and you have your transaction entered already, you will be able to simply go to your bank feeds and match the incoming transactions to the transactions you have entered in that credit card account.
When you are recording a payment to your credit card account, you would go to your checking account, or whichever account you are making the payment from and enter your information to make the payment making sure that you select your credit card account as the category or account you are recording it as. When you do this, it will reduce the balance you have accumulated in QuickBooks and your balance sheet will reflect the correct balance on your credit card account. There is no need to struggle to try to find out which expenses you are paying for this specific payment as you have already recorded each of the individual transactions and now you are simply just reducing the balance you owe by making the payment and recording it as your credit card account for the category or account.
When you receive your credit card statement, I highly recommend you go through each transaction and make sure you have a receipt for each and every transaction so that you have all the proof you need if there is ever an audit, or you are even looking for a receipt for a return. You could match the receipts to the statement and keep those receipts with the statement if you would like, or make sure you have uploaded a copy of each receipt in your QuickBooks file.
After you have matched all the receipts and you know you have all the credit card transactions entered in QuickBooks, it is time to reconcile your credit card statement. Just like when you reconcile your bank statement, you will go to the reconcile screen and you will check off each of the credit card transactions including any payments or credits that you may have encountered during that month’s activity. Once you have everything checked off, your reconciliation should be in balance, and you are all set. If you happen to find a transaction that hasn’t been recorded yet, you can simply add that transaction at that time and continue to finish reconciling your credit card statement.
Once you have reconciled your credit card statement, you know that you have accurately recorded all your transactions and payments and your balance sheet and income statement should reflect these accurate amounts.
One last thing I would like to quickly mention is the difference between using your credit card and using a debit card, if you have one. When you use your credit card, you are increasing the balance you have to pay back – or your liability to that credit card company. When you use a debit card, it is subtracting the amounts for each transaction from the account you have your debit card with. Most likely it is your checking account. Recording these transactions will be done differently than recording your credit card transactions, so be sure that you understand the difference and how they are reflected in your financial statements.
I hope this process of recording credit card transactions and ensuring you have all your credit card transactions accounted for is helpful for you. If you haven’t already, make sure you take advantage of my 5 Essentials For Stress Free Bookkeeping. This guide is helpful whether you are doing your own bookkeeping for your business, or you are doing bookkeeping for multiple businesses. You can grab this free guide by going to https://www.financialadventure.com/5essentials ~ I’ll post a link where you are listening to this podcast so that you can make sure you are following these guidelines for stress free bookkeeping, and I want you to know that I am here for you if you ever need help with your bookkeeping, just let me know. You can contact me by going to www.FinancialAdventure.com/Contact-Us.
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