Bookkeeper Discussions

How to record convenient fee?

Hi,

I have a client that when her customers pay by CC, she charges them 3.5% because her merchant charges her 3%. I am not sure if the way I set it up in the QB is correct. I added a service as credit card fee (as an income). But I’ve seen other companies put to under credit card fee as an expense!

What is the correct way to record it?

in progress 4 Answer

Answer

  1. 74 Answers

    The credit card convenience fees can be recorded in several ways. My preference is either income or COGS. When your client charges the fee the amount charged should be recorded to one of those accounts. I tend to keep bank fees (an expense) separate from merchant fees. An important step to remember is when the credit card company charges your client, that fee should also be recorded to the same GL account. Technically this is just a pass-through wash fee to your client. Most times there is a small difference as the fee is never exactly 3%. Hope this helps and feel free to follow up with any additional questions you may have.

  2. 15 Answers

    If we do not record this as income then the gross income would be understated. Doesn’t it create issue in case of audit?

    • 74 Answers

      Hi, the sale is recorded at gross in the revenue line. If you are using the processing fees (income account) or Merchant Fees (COGS) account to record the fees there should only be a small variance between the amount your client is charging and the amount your client is paying to the merchant fee processor. Neither one of these have anything to do with your gross revenue. The revenue should be recorded at gross + fee charged – fee paid.

  3. 15 Answers

    Now I got it. Thank you!

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