One of the biggest Quickbooks mistakes that I’ve seen throughout the last 18 years is the way credit card bills are handled. Quickbooks has one of the best credit card functions that I’ve used; however, many users struggle with entering their credit card payments every month. Some users enter a check for the payment and select an expense account. This method will work IF and only IF the entire bill is being paid in full. If you’re only making payments, this can present a problem because the balance isn’t being tracked and the expenses are not complete.
Some users enter a bill for the credit card and pay it through Accounts Payable. This also can work but is not convenient if you use the credit card to pay another bill that’s entered in Accounts Payable.
The correct method:
- Make sure the credit card account is set up as a type “Credit Card” in the Chart of Accounts.
- Make sure you only use one Quickbooks account per card or account. Mixing them will cause a lot of confusion. To distinguish the cards, I recommend putting the last four digits of the account number in the Chart of Account name. If you have a company account with several cards, I recommend using sub accounts to track them.
- Every month, enter the credit card charges by going to Banking ->Enter Credit card charges. You can enter these in bulk or enter each charge individually.
- To pay a bill using the credit card, go to Vendor -> Pay Bills and select the bill, change the “Method” to Credit card and select the credit card to use.
- When paying the credit card, either enter a “bill” or do “Write checks” and chose the credit card account.
- When a statement is received, reconcile it to Quickbooks by going to Banking->Reconcile, then select the credit card account. Treat the credit card just like the bank statement; Every charge and payment should appear and be reconciled each month.
When the credit card feature is used in the the intended way, there is less room for error and more accuracy in reporting.