How to Manage Credit Card Sales with a 3rd Party Credit Card Processor in QuickBooks Online

Welcome to the Fit Small Business QuickBooks Online training course! In this lesson, we’re going to cover how to manage your credit card sales in QuickBooks Online if you’re using a third party credit card processor.

We’re glad you’re taking the time to learn QuickBooks Online, our best overall pick for small business accounting software. We encourage you to follow along in your own QBO account.  If you don’t already subscribe to QuickBooks Online, click here to sign up for a free 30-day trial.

To complete this lesson, you can either watch the video below, read through the step-by-step instructions, or do both. Let’s begin!

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Intuit Payments vs. 3rd Party Credit Card Processor

Nowadays most people don’t carry cash, and fewer still are writing checks. If you want to cater to as many customers as possible, you will need to accept credit cards as a form of payment. Credit card processing companies offer this service for a fee.

Many QuickBooks users decide to go with Intuit Payments as their credit card processor because it’s fully integrated with QuickBooks Online, so your accounts and financial statements are always up to date. If you use Intuit Payments, click here to understand how to manage credit card sales in QuickBooks Online.

If you use a different credit card processor, the steps for managing credit card sales are a bit different. That is what this lesson will cover.

For more information on credit card processing, be sure to read our article on best merchant services providers and our guide on credit card fees.

How Do I Record Credit Card Sales from Customers in QuickBooks Online?

There are two ways that you can record customer payments in QuickBooks. If a customer pays you immediately, you would record a sales receipt. However, if you have a credit sale, which means that your customer pays you sometime in the future, then you want to receive a payment for an invoice in QuickBooks. Let’s begin with the sales receipt.

Record a Credit Card Payment using a Sales Receipt

Step 1 – Navigate to the Sales Receipt Form

From the Home page, click on the plus sign at the top as indicated below.

Below the Customers column select Sales Receipt as indicated below.

Step 2 – Complete Sales Receipt Form with Credit Card Info

The create sales receipt window will display.  Complete the fields as indicated below and click save.

1. Billing address: This field will autopopulate with the information that is in the customer profile. In the how to set up customers lesson, we walk through step by step to show you how to set up your customer info.
2. Sales Receipt date: This should be the date that you made the sale.
3. Payment method: Select credit card from the drop down.
4. Deposit to: This is the bank account that your credit card payments will be deposited to. If you want to change the account, you can do so in this screen.
   TIP: I recommend that you use the Undeposited Funds account to hold all credit card payments. This account is automatically created by QuickBooks. Consolidating all credit card payments into the Undeposited Funds account makes it easier to combine multiple credit card payments (if you need to) in order to match up with the bank deposit amounts. Refer to the How Do I Record Credit Card Deposits section of this lesson for more details.
5. Product/Service: Select from the drop down the product/service sold to your customer.
6. Description: This field will automatically populate based on the info for the product/service. You can also type a custom description directly in this field.
7. Quantity: Enter the quantity, if applicable.
8. Rate: This is the cost of the product or service. This field will automatically populate based on the setup of the product/service.  You can also type a rate directly in this field.
9. Amount: This field will automatically calculate by multiplying the quantity times the rate.
   TIP: At this point, you should process the credit card payment for the customer how you normally would. Once you have the approval code, enter that code in the Reference No. field on the sales receipt as indicated above.
10. Reference No: Enter the approval code that you received once you process the credit card payment.

Step 3 – Save Sales Receipt & Email to Customer

Once you save the sales receipt there are a couple of things that will take place “behind the scenes” in QuickBooks:

1. The send email window will open so that you can review the email that your customer will receive along with a PDF copy of the sales receipt as indicated below.
   Once you have made any necessary changes, you can click the Send and Close button.
2. The sales receipt will have the following impact on the financial statements:
   

   Account Affected	Impact on Account	Financial Statement
   Sales account	Increase	Profit & Loss
   Bank Account or Undeposited Funds Account	Increase	Balance Sheet

3. Navigate back to the Sales receipt, and notice that the status is now Paid as indicated below.
   

Record a Credit Card Payment on an Invoice

If your customers don’t pay you immediately for a product or service, you would record their credit card payment on an invoice instead of a sales receipt. Here are the steps for recording a credit card payment on an invoice.

Step 1 – Navigate to Create Invoice

From the Home page, click on the plus sign at the top as indicated below.

Below the Customers column, select Receive Payment as indicated below.

Step 2 – Complete Invoice

The receive payment window will display. Complete the fields as indicated below.

1. Customer Name: Select the customer from the drop down.
2. Payment date: Select the date that your customer is making the payment.
3. Payment method: Select credit card from the drop down.
4. Deposit to: Select the bank account that the credit card payment should be deposited to. To change the account, you can do so from the drop down.
   TIP: I recommend that you consolidate all credit card payments into the Undeposited Funds Account. This will allow you to easily match the payments in QuickBooks with the amount of the bank deposit. To set up the Undeposited Funds account as a default account for all credit card payments, refer to the How do I manage credit card sales with an Intuit Payments account lesson.
5. Select the invoice(s) that the customer is paying.
6. Enter the amount to charge the credit card.
   TIP: At this point, you should process the credit card payment for the customer how you normally would. Once you have the approval code, enter that code in the Reference No. field on the invoice as indicated above.
7. Reference No: Enter the approval code for the credit card payment.

Step 3 – Save Invoice & Send to Customer

Once you save the invoice, there are a few things that take place “behind the scenes” in QuickBooks:

1. The payment will be saved and the credit card payment will be processed.
2. The credit card payment will have the following impact on the financial statements:
   

   Account Affected	Impact on Account	Financial Statement
   Accounts receivable	Decrease	Balance Sheet
   Bank Account or Undeposited Funds Account	Increase	Balance Sheet

3. Navigate back to the Invoice for confirmation that the payment was applied correctly. The invoice will be marked as Paid as indicated below.
   

How Do I Record Credit Card Deposits in QuickBooks Online?

Once you have processed credit card payments in QuickBooks, you will need to record the deposit of those payments into your bank account. Credit card deposits may not show up in your bank account for 2-3 days.  Once the deposit shows up in your bank account, follow these steps to record the deposit in QuickBooks:

Step 1 – Navigate to Bank Deposits

From the Home page, click on the plus sign at the top of the page, and below the Other column, select Bank Deposit as indicated below.

Step 2 – Create Deposit

If you are using the Undeposited Funds account to hold your credit card payments, then you will need to follow these steps to transfer those funds out of the Undeposited Funds account and to the bank account where the credit card payments were deposited.  

TIP: If you used your bank account to record credit card payments then you do not need to complete these steps.

The following window will display. Complete the fields as indicated below.

1. Bank Account: From the drop down, select the bank account where the credit card payments have been deposited.
2. Deposit Date: Select the date the credit card payments were deposited to your bank account.
3. Select payments to deposit: Select the credit card payments that were deposited to your bank account.
   TIP: In general, credit card payments may be combined if they occurred on the same day or the next day. Therefore, you may need to select multiple credit card payments to match up with the amount that was deposited to your bank account. In the example above, the two credit card payments that have been selected were processed in QuickBooks on 9/22. However, the bank deposit for both payments was made 4 days later on 9/26. On the bank statement, the total deposit amount is $1900.00.
4. Payment Dates: This is the date you processed the credit card payment.
5. Deposit Amount: This should equal the deposit amount on your bank statement.

Recording the deposit will have the following impact on the accounts and the financial statements:

How Do I Record Credit Card Fees in QuickBooks Online?

You should set up an expense account called Merchant Fees or Credit Card Processing Fees to record all of the fees that you will be charged. In the How to Set Up the Chart of Accounts lesson, we walk you through step by step how to set up new accounts.

Wrap Up

That wraps up the section on How to Manage Credit Card Sales with a 3rd Party Credit Card Processor in QuickBooks Online. The next lesson in our QuickBooks Online Training Course will cover the Profit & Loss Statement in QuickBooks Online. In this course, we will discuss what the Profit & Loss statement will tell you about your business and how to create a P&L report in QuickBooks Online.

To access this lesson or any of the others in the series, click here. Or, click here for a free 30-day trial of QuickBooks Online.

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