The banking industry has vastly changed in the last decade. The banks and credit unions have had to accept that other service providers have entered the arena when it comes to cash transactions.
The most well-known of these are Venmo and PayPal. But how do we keep track of these in our books? (And yes, as a business you need to keep track of them in the books!) There are many ways and it depends on what is easiest and most comfortable for you. I’m going to describe one way that makes the bookkeeping easier within QuickBooks.
Create a new “bank” account in the Chart of Accounts and name it Venmo, PayPal, or whichever is appropriate. If you want to, you can link that account to your QuickBooks file so that transactions come in through the Bank Feed. Once you do this, all your transactions will automatically load.
You can sync payments made by clients so that their invoices show as paid by Venmo or PayPal. You can also manually record payments and use these services as the method of payment. Within your register, you’ll record the total revenue received and then record the transaction charge. This is important! You want to make sure that your client’s account is given the full amount they paid and then, you record your cost from the service.
For example, if your client pays your $200 and Venmo takes $4 as their fee, you don’t record the payment as $196.00. Even though this is the amount you received on your account, it isn’t the true revenue. You would record $200 as revenue and then $4 as an expense. If you just record the $196, you are under reporting both your revenue and expense. If audited, this would be a red flag to the IRS because you didn’t record your true revenue amount, thereby under reporting for tax purposes. Not to mention that you also won’t see the correct amount when you look at reports!
Once the payment is recorded within the register, you can then create a transfer from this account into your bank checking or savings account. The transfer doesn’t have to be linked to the client because you’ve already created a transaction for that. All you need now is to record the moving of the funds.
Other systems, such as Zelle, are usually linked to your bank account so that the funds come directly into your bank account. In this case, you’ll record the payment directly into your bank account. This doesn’t require you to set up a separate account. And if we lost you at "How do we keep track of these in your books..." then reach out to us for a free call on how Saul Bookkeeping can help you keep track of things! We can help businesses of all shapes and sizes across a range of services. Whether you need help with business plans & projections, new business formation, a pricing audit & service tracking or bookkeeping and payroll, Saul Bookkeeping is here to take the fear out of your finances. Let us help so you can get back to doing what you do best - running your business!