How to Record Square Payments in QuickBooks Online

By Amanda Karen | CrunchSum

Square is a convenient way to receive invoice payments from your clients, however the bookkeeping side of recording Square payments in QuickBooks Online can sometimes be tricky. Because of transaction fees, some additional bookkeeping must be completed first before you’ll be able to match your Square deposits in the banking transactions screen. The tutorial below will walk you through how to record Square income transactions step-by-step.

    Please reference the following information when walking through the tutorial:

      Square deposit amount: $483.75

      Amount of invoice paid: $500.00

      Square processing fee: $16.25

        *The Square payment used in this example is for a single invoice. It is very likely that your Square deposit transactions cover multiple invoices.

          Step 1: Identify your Square deposit transactions.

            Review your current bank transactions in QuickBooks Online: Transactions > Banking.

              Step 2: Identify the customer invoices that were paid via Square.

                Step 3: Receive Payment against open invoice(s).

                  Select the invoices that were paid through the Square deposit. Make sure that this payment is being deposited into your Undeposited Funds account.

                    To ensure that the associated Square transaction processing fee is recorded accurately, the invoice payment must be applied manually through the “Receive Payment” screen (rather than through the matching feature). A manual deposit must also be entered (step 4).

                      square and quickbooks online

                        Step 4: Add a new Deposit “+” > Other > Bank Deposit.

                          square and quickbooks online

                            Step 5: Select appropriate invoice(s) and record the Square processing fee part of the transaction.

                            square and quickbooks online1

                              *For purposes of recording any transaction related fees we like to create and use a Processing Fee expense account for our clients. Consult your CPA when in doubt which account(s) you should be using.

                                using square with quickbooks online

                                  Make sure to enter the amount of the Square processing fee as a negative number so that it deducts from the total deposit amount. This will ensure that we are able to match this transaction (step 6).

                                    Step 6: Match your deposit to accept the transaction in QuickBooks Online.

                                      Go back to Banking > Transactions and locate your Square deposit. Since the processing fee has now been recorded in QuickBooks Online, you will be able to match your Square deposit.

                                        using quickbooks online with square


                                          Following the steps above is one way to record your Square deposit transactions in QuickBooks Online. We should note that if you process a lot of client invoice payments through Square then the most efficient option might be to sync your Square account to QuickBooks Online. This will help streamline the process and make it a lot less manual.

                                            Have any questions or comments? Drop us a line below!

                                            CrunchSum provides web-based bookkeeping and QuickBooks Online support services to web and technology companies.

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                                            8 thoughts on “How to Record Square Payments in QuickBooks Online

                                            1. I’ve been using the QBO-square integration but am finding it very time-consuming and wondering if there is a good way to just make a monthly entry instead using square reports. In my situation there are many sales a day and many items in each deposit so the manual step of matching the square sales to the daily deposit takes a long time. I am wondering if I just accept all the square deposits to a square account and then make a journal entry to record the month’s sales and move the square deposits into sales. Am I making sense? Any thoughts?

                                              • Hi Alexa, thanks for the comment. Assuming that your Square transactions hit your bank account – when your synced bank account transactions are downloaded to QBO, they will show up as income transactions. When you go to accept these transactions in QBO, you can assign them to your “Sales” income account at this point. You shouldn’t need to make a journal entry if you follow what I previously stated. Please let us know if you have any further questions.

                                            2. Step 5: Select appropriate invoice(s) and record the Square processing fee part of the transaction.

                                              —— i cant see the appropriate invoice no matter what i change the date to.. as a matter of fact i cant see any invoices here to apply the fee to. what i’m i missing.

                                              • Hi Steve,

                                                Thanks for the comment. Have you confirmed that in Step 3 when you are receiving payment against open invoices that these payments are being deposited into your “Undeposited Funds” account? This is the only way that they will show up on your “Deposits” screen.

                                            3. The steps provided are efficient steps. I’m confused because the Revenue should show the actual amount invoiced to client, but instead it’s showing the amount from the bank feed (Sales – Fee). This appears to not report the correct revenue received. The owner should take the merchant fee expense not the client. In order for the client not to have a balance, I have to show the full amount paid $225 in the “received payment”. This does not match the bank statement transaction whether its from the bank feed or the bank statement. ($225 – Fee). Then, to add another question: When I run the balance sheet, the amount is not in the bank statement, it’s still in the “undeposited funds”. How do I show the deposit in the bank statement in order to reconcile and show the correct balance?

                                              • Hi Alethea,

                                                  We will attempt to answer your question in 3 parts.

                                                    1. When you mention revenue, are you referring to what is being reported on your Profit and Loss report? Your revenue should be reporting the full amount. Can you confirm that the Processing Fee expense account (or whatever account you are tracking the Square transaction processing related fees in) mentioned in Step 5, is assigned to an expense account? It sounds like it might be assigned to the same Sales income account that you are using to record revenue to, which would make it seem like the full invoice payment amount is not being recorded. More specifically, on your Profit and Loss report, you should be able to see a line item for all Square processing related expenses in the expense section of your Profit and Loss report.

                                                      2. You are correct that on the Receive Payment screen you are recording the full amount of the invoice payment (assuming you received the full amount) even though this doesn’t tie to your bank statement. If you did in fact receive the full invoice payment then this needs to be recorded. You make this transaction tie to your bank statement when you enter in the deposit and simultaneously enter in the processing fee amount as shown in Step 5.

                                                        3. The reason that you are still seeing the payments in your Undeposited Funds account is because deposits are not being entered. Once you receive the payment against your invoice (Step 4) then follow the steps exactly in Step 5 to enter the deposit and related processing fees. Entering the deposit will automatically remove the payment from your Undeposited Funds account and will also enable you to match the deposit to the deposit bank transaction in your Transactions > Banking screen (Step 6).

                                                          Thank you for your inquiry. Please let us know if questions still remain.

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