Some of our items will be available for purchase by card. Rather than include the fee into the price for all to pay whether by cash or card, it’s been decided that for card payments the customer will pay the fee. I realise this will inflate our income and expenses. I looked at billable expenses and was lost. So, if I were selling eg a $10 item and the customer was paying by card I was going to add a line and charge them eg total $10.20 with the 20c fee allocated to a fees account and then at days end zero that account by spending money to pay the merchant. The merchant collects the $10.20 and passes $10 to us. Is there a simpler way or some way to do this so not inflating the inc/exp?
Up to this point all is good, but just to clarify, are you doing the above as a Sales Invoice and does the merchant in collecting the 10.20, only pass on 10.00 or do they pass on 10.20 and charge you separately for the fees ?
If the merchant is only passing on 10.00, then you can’t be doing that days end Spend Money, as there isn’t an “actual” Spend Money transaction, i.e. no actual money movement is occurring.
So if you are doing a Sales Invoice and charging the customer 10.20, then their balance is 10.20, if the merchant only pays 10.00, then the customer now has a balance of 0.20.
So to remove this balance, add a line to the merchants Receive Money, 10.20 to the customer and -0.20 (note minus) to the fees account. By doing this eliminates the “artificial” Spend Money at days end.
To not inflate the income & expenses, you could create a Balance Sheet > Fees Clearing account, the Sales Invoice 0.20 goes into the account and the Receive Money -0.20 goes out of the account so the balance is Zero.
I was going to do it as a sales invoice. The customer will pay $10.20 for the $10 item. The merchant will only pass us $10 of the $10.20 paid.
Then do as described above:
So if you are doing a Sales Invoice and charging the customer 10.20, then their balance is 10.20, if the merchant only pays 10.00, then the customer now has a balance of 0.20.
So to remove this balance, add a line to the merchants Receive Money, 10.20 to the customer and -0.20 (note minus) to the fees account.
Sorry I’m lost with the merchant receive money. Sales invoice for $10+20c fee. Customer pays 10.20 with $10 received as the payment leaving 20c outstanding on the invoice. I only record the $10 actually received and not the $10.20 paid. I don’t spend money but record merchant receive money of minus 20c. Can you step me through this please?
Sales Invoice
Receive Money
The customer account was charged 10.20 and received 10.20 so it cleared.
The bank fee account has received a debit and credit so it’s zero
The receive money equals 10.00 which the merchant paid to you.
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Thanks, makes perfect sense seeing it and as said previously it shows fees in/out. If I created clearing account then these fees would not show. Is it stll acceptable to do that with a sales invoice
Yes, the Sales Invoice doesn’t know or care if it’s an income or balance sheet account.
When I produce a customer transaction statement the report shows correctly the invoiced amount inc fee and the total payment. In my case it shows the inflated payment received inc the fee which is not really correct. Is there anything I am doing wrong?
This is an invoice
This is the transaction report which shows $112.13 as being received from the card company. The amount I received was $110.00
Can I do this another way to show the actual amount received from the card company?
No. And it would not be correct from either your perspective or the customer’s. The customer statement shows transactions with the customer, not with the card processor. You charged 112.13 and the customer paid 112.13. You would not want to send the customer a statement showing they had only paid 110.00.
I agree totally with that, but I was hoping there was a way to show the actual amount transferred from card provider as being less the $2.13 fee, but appears not. Thanks
There is, in your records of your card account (which I assume you have set up as a bank account).
Why would you want the 110.00 to show anywhere else? The customer never paid you 100.00, and if they want to know what they paid for with their 112.13, it’s clearly shown on the sales invoice. Put yourself in their shoes: if they go looking to confirm what they paid 112.13 for, they aren’t going to look for transactions for 100.00. On the other hand, if they are keeping careful records and wonder how much they spent on memberships versus bank charges they were assessed, the relevant entries will be in whichever accounts they posted those lines on your sales invoice to.
The bottom line is that what you are doing now will not raise confusion, but what you were hoping to do might.
It seems you would want to do this in two steps if I am understanding properly.
On the sales invoice, add it as described above. On the receipt record the amount of the invoice and a negative amount for the fee. Example:
Invoice
Line 1 Sales $100
Line 2 Card Fee 2.00
Total $102.00
Receipt
Line 1 Accounts Receivable / Customer / Invoice $102
Line 2 Card Fee NEGATIVE $2.00
Total $100
Your income statement should show zero or close to it because you are not paying the fee, your customer is.
What you describe, @VISA-MC, is exactly the method illustrated in post #6 above. But your comment, “Your income statement should show zero or close to it because you are not paying the fee, your customer is” is not correct. The profit and loss statement will show the $100 sale (in your example) plus the $2 fee from the sales invoice, because you will have “sold” the fee to the customer. This will be offset by a $2 expense from the receipt. So, while total income from the transaction will be $102, net income will be $100. And your business is, in fact, paying the fee to the card processor, which will show as an expense. But the sale to the customer has been increased to compensate.
It may be handled different in different jurisdictions, but if enforced, our clients pay the fee directly to the processing company.
Yes, but they also pay the amount for the goods or services sold to them to the processing company. What they are paying for is your invoice. The card processor does not charge the customer the fee, they charge you by reducing the amount passed through. Remember, from Manager’s perspective, the card processor is a bank, and the customer makes a deposit to your account with that bank. The processor then reduces your account by the amount of the fee. The card processor has no knowledge of line items on your sales invoice or whether you have broken out the card fee. All the processor knows is how much the customer deposited. They would subtract the same fee regardless of how your invoice was constructed.