I often see companies that use QuickBooks, have a credit card and pay from the system, but do not set up and pay their credit card using the Credit Card account feature. Instead, they are using the Enter Bills function. When the credit card statements are being paid on time, this does not appear to be a problem; however, when cash is tight, unnecessary accounting complications start to unfold. It’s also more difficult come tax season to track expenses when credit card transactions are entered in this fashion.
QuickBooks can efficiently handle credit card transactions… and all you have to do is create a Credit Card account type in the system. Once the account is set-up, entering charges becomes a breeze. The QuickBooks homepage even has an icon specifically for entering credit charges called “Enter Credit Card Charges.” So why not use QuickBooks to the fullest and create a Credit Card account?
Setting up a credit card is not difficult. It simply requires one to add a new account that is a Credit Card account type. Furthermore, most credit cards offer the ability to download transactions into QuickBooks directly – making the process that much more efficient.
Additional benefits from using the Credit Card account type include the following:
- Each charge is distinctly listed within the Credit Card account register
- Each charge is posted to the vendor from whom the purchase was made
- The company’s credit card liability is reflected accurately every month end as each charge is entered by the transaction date
- If transactions are downloaded, time can be saved from not having to key in each charge and accuracy can be increased from avoiding the potential of human typing errors
Be sure to come back to the blog for a future post where I show you how to set up the Credit Card account in QuickBooks.