When you accept credit card payments from customers, you are temporarily transferring the collections for that payment to your merchant services processor.
You record the sales today for the product or a service provided to your customer but do not receive the actual cash (money in the bank) until the merchant services processor successfully collects the money from the customer and transfers that money to your bank account. Depending on the processor's terms, weekends, and bank holidays the process may take anywhere from 1 to 5 business days.
There are, typically, three accounting approaches to mapping the credit card tenders processed on your Point of Sale to your accounting system. You will have to choose the one that best fits your workflow.
NOTE: Shogo posts an expected deposit to your accounting system and you will separately record the actual deposit when it clears your bank statement - either via your bank feed functions or via manually recording deposits in your accounting software..
Payments/Tenders Mapping Approaches:
1). Map directly to a bank account in your accounting software.
Pros: Allows you to have a direct audit trail and matching function of the expected deposit to the actual deposit.
Cons: If there is not an exact match between the expected deposit and the actual deposit, you will need to manually resolve the difference. You are also temporarily overstating your bank account balance in your accounting software which could lead to bank overdrafts if you are relying on the accounting software reported balance when paying any bills or planning for any banking direct debits.
2). Map to the Undeposited Funds Account
Pros: Allows you to have a direct audit trail and matching function to the actual deposit. Addresses the timing difference discussed in Method 1.
Cons: If there is not an exact match between the expected deposit and the actual deposit, you will need to manually resolve the difference.
3). Map to an Other Current Asset Clearing Account such as "Due from Merchant Services"
Pros: The closest approach to a "set it and forget it" workflow. Expected deposits are booked by Shogo into the clearing account as they are recorded in your Point of Sale and Actual deposits are cleared out of the clearing account when the actual deposit reported on your bank statement is processed. This approach also allows you to precisely gauge the amount of money you will have coming into the bank in the near term from your processor.
Cons: You are shifting the audit trail process from a transaction based process to a balance based process. This can be a pro and con - the pro being that you only need to look deeper into your transactions whenever the balance veers from its expected amount; the con being that it could take you longer to find and resolve if you have not verified your account balance for some time. For reference, the "expected" balance in this account should always equal your most recent credit card sales for which you have not yet been paid.