Are you one of the many business owners who uses credit card processing as a method of payment for your invoices? Then you’re more than familiar with Transaction Fees (also known as Merchant Fees). Most credit card processors will deduct these fees from the original payment made by your customer. You're then left with a net amount in your Wave account and a fee you are looking to account for. Well, we’re here to help!
Let’s use the following example:
I sent an invoice to my customer for $100 and they had used PayPal to pay for the service. PayPal deducted $3 from this payment for merchant fees and sent me a deposit for $97. Since I have my bank account connected to Wave, I saw a deposit transaction download for $97. I now have an outstanding invoice for $100 and no way to account for the merchant fee.
Here’s what you’ll want to do:
- Head over to Accounting > Transactions and locate the net deposit.
- Click the down arrow on the right of the transaction and select Split.
- Split the transaction into 2 parts: $100 and -$3 (notice there is a negative next to the $3 amount - this is to ensure that the total equates to $97).
- Select the new $100 transaction and click the down arrow on the right, then Create Invoice Payment (if applicable, if not - see Step 5).
- If you do not have an invoice for this customer, simply categorize the $100 into the appropriate income account for your business.
- Categorize the $3 expense transaction into the Merchant Account Fees expense category.
If you'd like for your accounting to look really pretty, check out our Batching and Balancing Transactions with an 'Undeposited Funds' Account FAQ.