If the deposit to your bank is an online payment:
- FROM Square, Stripe, Paypal, or Authorize.net: Categorize the deposit as "Transfer between accounts". Then add a separate transaction to manually expense for the transaction fees.
Why? When an online payment is made or when a payment is manually recorded, 17hats automatically creates the entries in bookkeeping that are already associated to the invoice, one entry for "Sales" Category, another entry for "Sales Tax" (when applicable). Categorizing the deposit "Transfer between accounts" avoids counting the sale twice.
If you received money (ex: Square, Check, or Cash), AND have recorded a payment to the invoice:
- Follow the same steps listed above: Categorize the deposit as "Transfer between accounts". Then add a separate transaction to manually expense for the transaction fees.
If you received money, AND HAVE NOT recorded a payment towards the invoice:
- Record a payment in the Invoice, then follow the same steps listed above.
- In situations where a deposit amount and the invoice payment amount matches, AND the the payment has not been recorded, you can use the Apply to an Invoice feature.
- Special note about deposits and batch depositing: Most payment merchants transfer deposits to you in batches. For example, if you made multiple sales in a day, that money minus the transaction fees, will show as a single deposit from your bank. Having a payment recorded to the invoice and assigning your deposit as "transfer between accounts" simplifies your bookkeeping by eliminating all the work of having to split the deposit and assigning that money.
Example of PROPER bookkeeping:
Line 1 is manually entered as an expense. Line 2 is classified as a transfer, and does not count towards revenue. Line 3 records the revenue.
Example of IMPROPER bookkeeping. Line 1 is manually entered as an expense. Line 2 and Line 3 are both classified as revenue and thus inaccurate.
Disclaimer: 17hats does not provide tax or financial advice. This article is prepared for informational and instructional uses only. Please consult with your own accounting advisors.
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