How to handle fees (Paypal and Square) deducted from customer payments in QuickBooks Online

This article deals with step-by-step instructions on how to manually recording fees (Paypal or Square) and then match the deposit transactions in bank feed —Review items from your bank and link each item to an existing record.

EXAMPLE – Signed up for Square (or PayPal) so that I could accept credit cards. I will be paying the fee myself, not the customer. So when I give a customer an Invoice for $1,000.00, they will swipe their card and have $100 taken from the customer. Square (or PayPal) will take their fee off the top and then deposit $970.00 into my business checking account. My bank feed under review items from bank link will show $970.00 deposit ($1,000 customer payment less $30 fee).

Here’s how to handle fees (Square and Paypal) deducted from Customer payments in QuickBooks Online:

 

1. Identify the customer Invoices that were paid via Square or Paypal.

2. Receive Payment of open invoice amount (create “+” sign > customers > receive payment) . Select the invoices that were paid. Make sure to select “Deposit-to” that this payment is being deposited into your Undeposited Funds account.

 

NOTE: To ensure that the associated transaction processing fee is recorded accurately, the invoice payment must be applied manually through the “Receive Payment” screen (rather than through the matching feature). A manual deposit must also be entered (step 3).

3. Add a new Deposit. Click on the Create or “+” sign and go to “Other” and click on Bank Deposit.

4. Select appropriate invoice(s) “Select the payments included in this deposit” tab

5. Record the processing fee part of the transaction under Add New Deposits tab.

Make sure to enter the amount of the processing fee as a negative number so that it deducts from the total deposit amount.
Received From = Square or Paypal Vendor
Account = Fees (Expense or COG account)

6. Total deposit amount should match your deposit to accept the transaction in bank feed.

 

7. Go back to Banking and under the Dashboard, locate your deposit under “For Review” tab. Since the processing fee has now been manually recorded in QuickBooks, you will be able to match your Square or Paypal deposit.

 

How do you apply customer payment that has a merchant fee to an invoice in QBO?

You will need to group both your deposit and fee together so your deposit in QBO matches the bank deposit that was made in real life.

Here’s how to handle it in QBO at this time:

RECEIVE PAYMENT

  1. Create an Invoice for your customer as you normally would.
  2. From the home page screen, click the Create icon (+) when you’re ready to receive the payment from your customer.
  3. Choose “Receive Payment” from the dropdown that appears.
  4. Fill out the Receive Payment as you normally would, but ensure the Deposit to field reads “Undeposited Funds” account.
  5. Click Save and close.
receive payment deposit to uf
receive payment deposit to uf

 

BANK DEPOSIT

  1. From the home page screen, click the Create icon (+) when you’re ready to get the deposit, minus the fee, in your bank account.
  2. Choose Bank Deposit (under Other) from the drop-down that appears.
  3. Check off the payment from this customer (and any other payments in the batch).
  4. In the Add New Deposits area, enter in the fee as a negative number, so it reduces the overall deposit total.
  5. Click Save and close.
payment minus fee
payment minus fee

This will then match the deposit made to your bank account and record the proper account.

 

WATCH VIDEO

I have already received payments in QBO from multiple customers. How to make them match with a single deposit I see in my bank feed.

You’ve two ways to match with bank feed deposit.

1) Match it directly from the bank feed downloaded transactions.

Select a row for deposit in question. The row expands to show you “Find other matching transactions” button. Once you click this button, you will see a long list of possible match transactions. To easily locate your deposits, change payment date as you’ve recorded. Select payments (type = payment) to match with bank feed deposit amount. Make sure difference is zero. Save. Done.

find other matching transactions1
find other matching transactions1

2) Manual. This will take few steps, but you will see green MATCH sign once done.
a) Go back to “Receive Payment” (create+ sign > customer > receive payment > upper left corner clock, locate payment) screen for customer payment you’ve already recorded and change Deposit to: “Undeposited Funds” instead of a bank account. Do the same for other customer payments that you want to match to a batch deposit.
b) Bank Deposit (create + sign > other > bank deposit) – check existing payments from the list to match batch bank deposit. Make sure to check correct bank account if you’ve multiple bank accounts. Save. Done. Save and Close.
c) Go back to banking center (bank feed) and now you should see green Match sign for that deposit. Click Match. It should disappear from the list.

Note: #2 is recommended process in QBO if you’ve merchant card payments or use bank deposit slip from depositing checks from various customers.

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Is there a way to create a sales receipt from an estimate

QBO is not set up to go from Estimate to Sales Receipt at this time. Currently, you create Estimate and then “copy estimate to invoice” to create an Invoice. There is no partial copy so it’s done just one-time. You receive payment against that invoice.

Workaround steps from Estimate to Invoice may also work as faster as creating from Estimate to Sales Receipt approach. Follow these steps, it may work as an alternative to Estimate to Sales Receipt.

1. Create Estimate (create + sign > customers > estimate)
estimate1
 
2. Copy to Invoice (either directly from estimate or from invoice form by selecting a customer)
invoice1
 
3. Select “Save” (bottom right, blue bottom) Invoice
invoice2
 
4. Once saved the invoice, you will promptly notice “Receive Payment” button added at the upper right corner. Click “Receive Payment” link.
invoice3
 
5. Receive Payment against the invoice. Done.
invoice4
 

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How can I transfer unapplied credit from one customer to another in QuickBooks Online

A case may occur when a customer wants to apply credit balance to an affiliated company’s open invoice.

EXAMPLE:

Customer (Mark) has a $500 credit balance. Customer (Martha) has a $500 Open Invoice. They like to clear the accounts by applying $500 credit from Mark’s account to $500 Open Invoice of Martha’s account.

One easy way to handle transfer credit from one customer to another customer is to write a Journal Entry in QBO.

Click on the screenshots below to enlarge them

Customers Page
Customers Page

Customer Mark's Account with $500 Unapplied Credit
Customer Mark’s Account with $500 Unapplied Credit
Customer Martha's Account with $500 Open Invoice
Customer Martha’s Account with $500 Open Invoice

 

To create a Journal Entry

From the home page screen, click Create+ sign

  • Click Journal Entry tab under Other heading.
  • Enter the date.
  • On the first line, from the Account drop down list, select Accounts Receivable (A/R).
  • In the Debit field, enter the unapplied amount being transferred. Example:$500.
  • In the Memo field, note the reason for the Journal Entry. Example: credit transfer to Martha’s account.
  • From the Name drop down list, select the customer name that credit is being transferred from. Example: Mark
  • On the second line, from the Account drop down list, select Accounts Receivable (A/R) again.
  • In the Credit field, enter the credit amount (same as debit amount). Example:$500
  • In the Memo field, note the reason for the Journal Entry. Example: credit transfer from Mark’s account.
  • From the Name drop down list, select the name of the customer that the credit is being transferred to. Example: Martha
  • Click Save.
Journal Entry
Journal Entry
Mark's Customer Page after Journal Entry
Mark’s Customer Page after Journal Entry
Martha's Customer Page after Journal Entry
Martha’s Customer Page after Journal Entry

 

The final step is to Receive Payment on both customer accounts so that it will show “Paid and Closed” customer status

From the home page screen, click Create+ sign

  • Go to the Customers tab and click Receive Payment.
  • Select the customer (example: Mark).
  • Make sure that the credit and Journal Entry are checked at the left (make no other entry on the Receive Payment form.)
  • Make sure “Amount received” show zero amount.
  • Click Save.

Follow the same “Receive Payment” steps as above for the customer (Martha).

Screenshot 2015-08-23 14.18.55
Receive Payment (Customer Mark)

Screenshot 2015-08-23 14.19.23
Receive Payment (Customer Martha)

Screenshot 2015-08-23 14.20.43
Customer Mark’s Page with Paid and Closed Status

Screenshot 2015-08-23 14.20.52
Customer Martha’s Page with Paid and Closed Status

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#QuickBooks Online

 

Is there a way to show Customer address information on the Receive Payment Form? We have several customers with names that are close, and I like to verify by address.

You can find by Invoice Number, but not by Customer address or zip code at this time.

Alternative choice is to use directly from the Customer Center where you can verify address before recording payment. And, that may be much quicker as well.

From the home page screen > go the blue navigation bar on the left > select customers > go to small middle gear in the middle right section (next to print icon and export to excel icon)

From the Gear drop-down > choose Address > Page will refresh with Address column added

Now you have Customer name as well as to verify that customer’s address.

Next go to Action column (last column on far right) > select Receive Payment from the drop-down list. It will take you to the Receive Payment page with outstanding transactions checked. Verify payment received on invoice. Choose Save and Close button. It will take you back to the Customer Center again.

receive payment from customer center