How to clean up QuickBooks Payments deposits to QuickBooks Checking

QuickBooks Payments with QuickBooks Checking

I just identified a HUGE problem with how Intuit implemented their new QuickBooks Checking account. Overall I like the account, which I talked about in a previous article, because it pays 1% interest and allows you to create “envelopes” to save money with goals.

However, the awkward interface can cause unwitting errors. I just cleaned up TWO different clients with over 250 transactions and overstated income of more than $75,000. Assuming this is happening to a lot of people who don’t have bookkeepers, many businesses may be overpaying their taxes.

The History

The problem is that when a QuickBooks Online (QBO) user turns on QuickBooks Payments Merchant Services, they create this actual bank account, potentially without their knowledge. They do click an approval button, but it may not be obvious that they are opening a real in-product checking account.

When Intuit first implemented QuickBooks Checking + Payments, all merchant service deposits went into this new QB Checking account. Unwitting business owners didn’t expect this and they freaked out when their income never showed up. To solve complaints that the money diverted to QB Checking, Intuit did clarify the opt-in experience and make the destination more obvious.

The Bookkeeping

It’s hard for ProAdvisors and bookkeepers to manage the new checking account. QuickBooks Checking sometimes has to be manually added to Banking Transactions, so some business owners literally don’t even know that it’s there.

Accountants using QBOA can’t see the Envelopes at all, except under the Cash Flow balances. Money in envelopes is not available to spend, so it’s important you know the total balance, the amount siloed in the envelopes, and how much is liquid in Quickbooks Checking itself.

Now here’s the really important part: As of this writing on April 28, 2022, there are two separate places where you have to manually declare the Chart of Accounts mapping for QuickBooks Payments. There’s one place to set the default bank account where you want the money to go…but there is a second set of Chart of Accounts fields that can still default to QuickBooks Checking even while the money is really deposited into their existing business operating checking account.

This is causing doubled income!

How to Fix QuickBooks Payments going into QuickBooks Checking if they’re really going into your bank account

If this happened to you, here is how to fix the duplicated transactions:

1. In Account and Settings > Payments, confirm the bank account to the actual checking account where the money is getting deposited.
2. In the same window, look for the Chart of Accounts settings and make sure the Standard Deposit and Instant Deposits both match the checking account. This will fix the problem for the future.
3. In the QuickBooks Checking account register, delete all the merchant services charges. They are not needed.
4. In the QuickBooks Checking account register, edit each deposit transaction and change it to the operating checking account.
5. In the operating checking account, verify which deposits correspond the actual transactions. They are probably categorized straight to income instead of to customers. Delete them. This will put the transactions back on the banking feed.
6. In the Banking Transactions list, all the deposits will now match the exiting deposits. Match them all.
7. Repeat your most recent reconciliation. It should just pull in all the original transactions.

There’s a second faster sledgehammer method: Figure out what income categories the revenue was from. Make a journal entry to zero out (credit) the QuickBooks Checking account, debiting one or more revenue accounts to compensate for the duplicated income. You sacrifice individual transaction accuracy, but you may well have better things to do with your time than touch each transaction three times using the steps above.

Why QuickBooks Checking is GOOD!

That will solve the past. Now for the future…

Maybe your money SHOULD go into this account!

Consider using QB Payments as it’s designed, as an automated integrated checking account that accepts all your customer credit card payments and uses them to fund your payroll.

I use the Envelopes to:

• put money aside for technology purchase
• save money to cover company expenses while I travel on vacation
• hold payroll taxes so I’m never caught short

You can set up for Instant Deposits and get your merchant service sales immediately, instead of waiting for days….for free!

Not to mention that 1% interest is better than I get from Bank of America!

Need help?

If you need help with this cleanup, give Alicia a call at 503-406-6550 and we can help!