How to Overcome Challenges With Credit Card Activity in QuickBooks
2021-04-19 | by Gene Reynolds
QuickBooks can be an incredibly helpful software tool to help your company manage, track, and make credit card payments. However, if your credit cards are not set up correctly in QuickBooks, this could create additional headaches trying to reconcile balances, keep track of transactions, meet payment deadlines, and produce accurate financial reports.
Also, as the number of users that are responsible for managing credit card activity in your company increases, this can further complicate the situation. Assumptions about someone else entering credit card transactions or reconciling accounts can quickly lead to inaccuracies.
To get the most benefit from using QuickBooks to support credit card activity, we recommend starting with proper set-up and implementing specific rules or processes that everyone in your company understands. Then, you can continue to grow your use of QuickBooks to eventually be able to automate the process of using credit cards in QuickBooks.
Start With Proper Set-up of Credit Card Accounts in QuickBooks
Whether you have been using QuickBooks for a while or you are brand-new to the accounting software platform, we recommend starting at the beginning to ensure that all credit cards are properly set up. This includes ensuring that you have entered the correct starting balance (or opening balance) for each credit card added to QuickBooks.
If you are adding a brand-new business credit card that you just opened, then this is a simple process. The starting balance is $0. However, if you have been using a credit card for some time, then you need to ensure that you enter an accurate starting balance. Getting this right on the front-end is critical because it will affect your ability to reconcile balances and produce accurate financial reports in the future.
Another critical step in the set-up process is ensuring that you understand how to categorize credit card payments in QuickBooks. We often find that companies face challenges categorizing credit card transactions and routing them to the proper expense accounts. As a certified advisor in QuickBooks, we can help with this step to complete the set-up process.
How to Record Credit Card Transactions in QuickBooks
After your credit card accounts are properly set-up, you have multiple options to record credit card transactions. You could either manually record each credit card transaction as it happens or you could link the credit card account to QuickBooks to automatically record each transaction. Let’s review the options.
Option #1 – Manually Record Credit Card Transactions
If you run a small business with a handful of monthly credit card transactions and no one else in your company is responsible for recording transactions in QuickBooks, then you could manually record each credit card transaction yourself. This requires strong attention to detail to ensure that you record activity as it happens so that you don’t lose track of transactions.
Or, you may prefer to set aside an hour every week or month to log into your credit card account and manually enter credit card transactions into QuickBooks. Many small business owners prefer this method so that they can get a better sense of how much is being spent on certain types of activity.
Option #2 – Automate Credit Card Recording
If you are dealing with volumes of credit card transactions on a monthly basis, or if you have other team members that participate in the management of credit card activity, then you may want to consider automating the process.
You can connect your bank and credit card accounts to QuickBooks so that QuickBooks automatically downloads and records each credit card transaction. You can also select how far back you want to go importing past credit card transactions. This is helpful if you want to be able to produce a report that compares the dollar amounts of current charges against past charges to track changes in certain expenses.
Automating credit card activity can be very beneficial, but it also comes with its own set of challenges. You and your team still need to periodically review QuickBooks to make sure it’s working correctly, not just set and forget it.
Some issues to look out for include ensuring that imported credit card transactions are being properly categorized, understanding when monthly re-occurring transactions are scheduled (e.g. a subscription to a software tool), and monitoring credit card payment due dates.
You also need to work with your team to ensure that everyone follows rules and procedures for adjusting credit card transactions. For example, there may be certain unique transactions that either your credit card company or QuickBooks does not understand how to categorize. Make sure you communicate with your team how these transactions should be adjusted in the system so that errors do not occur.
Make Credit Card Payments in QuickBooks
Now, you need to be able to make credit card payments in QuickBooks to meet your payment deadlines and pay down balances. We are often asked how to record credit card payments in QuickBooks, which goes back to the previous step of deciding whether to enter transactions manually or whether to automate the process.
– Manual option: If you are entering and recording transactions manually, then you can enter the credit card payment under the Money Out view in QuickBooks.
Make sure the payment is linked to the credit card that you are paying down, you enter the date of the payment, and that you record the method of payment (did you write a check, did you use a third-party bill pay service, or did you schedule the payment directly through the credit card company’s website?). It’s important to keep accurate records so that you don’t make a mistake tracking your ongoing balance.
– Automation option: If your credit card and the bank account that you use to pay your credit card are connected in QuickBooks, then you can enter a credit card payment in QuickBooks.
Under Banking, you can select the bank account that you want to utilize. Then, you can initiate a bank transfer from this account to the credit card that you want to pay down. After you confirm the transaction, the payment will be made directly to your credit card.
Once your credit card company receives and processes the payment, then it will be reflected in QuickBooks. And, because of this automation, the credit card payment should be automatically categorized in QuickBooks.
Find Support With Credit Card Activity in QuickBooks
There are so many ways to utilize the credit card functionality in QuickBooks. The key is to get it to work for you according to your specific business needs, not make the process more difficult to track and manage.
Our CPA firm can help. We’ll start with a review of your current setup, look for common red flags such as miscategorized transactions, and review whether manual entry vs. automation is the ideal fit for your company.
Let us know how we can help optimize your credit card activity in QuickBooks so that you get the most value from your investment in the platform. Contact us today for a QuickBooks consultation!
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