Tracking Credit Card Expenses on QuickBooks

Mistakes & Solutions

Using QuickBooks should be efficient and straightforward. Until, well, it’s not. Amatics CPA Group can help!

Many businesses call upon an accounting firm like Amatics to set up their books to ensure tight systems are in place. But sometimes, you may inherit a faulty system or simply not have suitable procedures in place.

Not using QB’s features properly limits the accuracy of your reporting. Entering credit card expenditures is a critical part of tracking your business activity. And doing it accurately helps business managers substantially.

These are a few common QB mistakes when it comes to credit cards . . . and how to fix them.

Mistake 1: Not setting up credit card accounts

Some QB users enter all credit card expenses without tagging which card those expenses were made under. They will label expense categories—for example, Travel, Office Supplies, Fuel, etc.—but will not track the details of each purchase: which specific card the purchase was made from, the date, vendor and dollar amount of each purchase, etc. This is a tremendous mistake.

You should set up each credit card as its own account, clearly labeled. Also, connect your credit cards to Online Banking. QuickBooks will then track your expenses (and payments) as they occur and your books will be perfectly synced with your credit cards. With the effective use of rules, this program will recognize the categories into which each expense falls based on where the purchase was made. For example, it will recognize US Postal Service as an item to be categorized under Shipping Expenses.

Mistake 2: Excluding vendor details

When you categorize expenses, be as detailed as possible. Don’t simply label the expense with a category name, such as “Travel.” What kind of travel? By air? Car? What if you want to compare how much you spent with Delta versus how much you spent with American Airlines?

Set up vendors and use them when recording every expense to be as accurate as possible. Then you can easily hop into the Vendor Center to see invoices, bill payments and checks for that particular vendor.

You can also make use of memos which are excellent resources when referring back to your expenses. To use the travel example, if you travel frequently, use memos to enter where you went and the business purpose of the trip. This allows you to easily see these details later rather than referring back to the source document.

Mistake 3: Improper use of credits

Sometimes, QB users record payments to the credit card as a credit. This may be a fast, easy (and dangerous) way to get your credit card to reconcile, but now, your bank account won’t reconcile since you didn’t actually record the payment coming out of the bank. You’ll end up with duplicate payments to the credit card: one actual payment and one credit.

This places your books in a lethal situation. If the credit is reconciled, you won’t be able to delete it without messing up your beginning balance for future reconciliations.

A payment on the credit card should always be made from the “Write Checks” or “Pay Bills” screen. Credits should only be used for refunds on items purchased and should point to the original expense category to offset the expense.

Mistake 4: Only entering payments

Our final QB Mistake is entering only credit card payments and not individual charges. This results in a big problem: you’re not tracking liability on your books (especially if you are carrying a balance and not paying the bill in full). And, as we mentioned above in Mistake 2, you have no detail of what expenses were paid to each vendor.

QuickBooks allows users to reconcile credit card accounts the same way they would reconcile a bank account. We highly recommend clients use this module.

We coach clients to enter each transaction, preferably, from the source receipt. When you receive your credit card statement, you will reconcile all charges entered to the statement. This method helps confirm that expenses are all entered accurately and ensures you have supporting documentation (receipts) for all of the charges that were made on the credit card.

To learn more about creating credit card accounts and recording credit card activity, get in touch with Amatics.

We are happy to send a field representative to your office to set up QuickBooks or consult with your bookkeeper!