• Section: How To
  • Last updated: June 12, 2019, 4:09 p.m.

Handle Bank Fees

This support article covers how to handle bank fees or fees associated with services like PayPal.

You may have bank fees associated with your customer payments (such as receiving payment from PayPal)

  • You should not create credit memos in the amount of the bank fees and apply the credit memos to the invoices.
  • Doing this will result in a sales journal entry showing your customer paid less than the invoice amount, although the P&L will be correct. In reality, your customer paid the full invoice amount, but there was a bank fee involved.
  • You should indicate full payment on the invoice, and expense the bank fee separately using the Undeposited Funds feature or a Spend Money transaction.

There are two methods that you could consider to manage this:

Undeposited Funds Method

  1. When receiving in money (through Receive Payments or Receive Money) choose to group this with undeposited funds
  2. Go to Banking > Prepare Bank Deposit
  3. Click on the Deposit Adjustment button
  4. Put in the fee, choose the expense account you would like to allocate this to, put in a transaction ID (this could be FEE or PAYPAL), a date to record this and put in a memo (if desired). Click Record
  5. Back on the Prepare Bank Deposit Screen check off the transaction deposit (the fee will already be checked) and click Record

The resultant deposit will be made for the actual received amount, and the fee will be recorded as an expense to the indicated account.

Spend Money Method

The bank fee could also be entered using Spend Money from the appropriate account. To do this:

  1. Go to Banking > Spend Money
  2. Select the correct account to be paid from (normally your checking account)
  3. Select the card of your financial institution
  4. Select the correct expense account and date - for the check number you could put something like FEE or PAYPAL (your choice here)
  5. Record the transaction

By doing this, both the sales journal and the P&L will be correct. And, there will be a record of fees paid to the financial institution (Vendor Payments Report). The downside to this is when you go to reconcile you will have two transactions (the spend money and the payment from your customer) making up the total amount you received.