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Level 1

Credit Card Reconciliation and Accounts Payable

When I reconcile my credit card statement Quickbooks asks me if I want to write a check or enter a bill.  I know you can select Cancel, but my controller insists we enter a bill.  That will transfer the balance due to A/P.  But what then?  

 

Let's say at the end of the billing cycle you owe 100k.  So you enter a bill for that amount, and make several 10K payments through the month.  Those payments are being applied against the A/P account, not the credit card account, right?

 

But then in month two, you have to "clear" several large payments that are on the credit card statement, and you have a large bill in A/P that also shows up in next month's reconciliation process.  I don't how to make sense of all this.  Is there a resource about paying credit card bills using the A/P method that I can read or watch?  Thanks for your help!

 

5 Comments
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Level 15

Credit Card Reconciliation and Accounts Payable

Never use Bill; escape or Cancel out of that Helper tool, because this is Not Helpful. It is allowing you to Hide one type of liability (CC) in another (AP) that is going to report incorrectly for financial reporting. Your Controller is wrong.

 

Point out that a Bill is a different liability. They do not report on Cash basis. Credit Card Purchases always report, even on Cash basis, because using the card to make purchases is a Micro-loan process.

 

"and make several 10K payments through the month.  Those payments are being applied against the A/P account, not the credit card account, right?"

 

Exactly; this is why your Controller is wrong. The Bill is treated as having Paid the CC account (like taking a Loan to pay a Loan).

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Community Champion

Credit Card Reconciliation and Accounts Payable

You have one A/P account and all bills for vendors as well as the bill your controller wants. The only correct method of clearing even one dollar from A/P is use Pay Bills. If you write checks for everyone this is where you create those.

 

Think of it this way, you carry a balance and have a minimum payment due. You can create a bill for that minimum to be paid later or you can cut a check to be printed later. Both have same result, and I have used both methods. I like to see the bill for the payment so it shows in AP report and can include it in a pay bills check run. At same time you can always create the check to be printed later. I suspect the controller wants to see it in the AP summary.

 

Neither method requires reconciliation, you can just enter the cc charges, add the payment however you want and then reconcile whenever is convenient

Highlighted
Level 15

Credit Card Reconciliation and Accounts Payable

There should not be a Bill that lists the CC account on it; you never want to hide the CC balance in AP; it's already reporting in the proper and specific type of Liability account = CC. If you ever do this, you would never make it for the Full Balance on the card. You never want an unpaid balance in AP for the CC. That's why, at most, you would make a bill for the amount you intend to pay and Pay it right away, which means you didn't need to make it two steps. You can just use Write Check to enter the payment to the CC account. In QB, if you mark that check to Print Later, it shows with the Print Run from Pay Bills, as well. You don't need to run something through AP just to see it as part of a check run.

 

The AP account is for these providers of goods and services who let you pay later.

 

The CC card provider is your Lender. You never bought any thing from VISA or AMEX and not on that date. This is not AP. Everyone you purchased from is Paid, already, because they used the card number to be paid.

 

A Controller that doesn't understand CC is not AP, is not really good at their job.

 

"Neither method requires reconciliation, you can just enter the cc charges, add the payment however you want and then reconcile whenever is convenient"

 

Every balance sheet account that has a running balance and an outside source of reference should be reconciled routinely and timely. That's the only way you confirm your own data is accurate (this CC is part of the source of your P&L data spending) and there is no Fraud (which you need to catch and dispute in a timely manner). A file without reconciliation is a file that has no Verification that the user is matching that outside source of reference, or that there is no Fraud to them, and any auditor would flag this as a Deficiency.

 

Yes, you can and should add the payments As you make them, because this is part of your Resource management = cash flow, spending, debt and Cash Requirements. The only reason not to do all of this and do it routinely and timely, is if you really don't care about watching the financial activities, you consider you have a large enough cushion that is doesn't matter, don't care about Fraud or even basic errors, etc. All of which is not really a great business management perspective.

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Level 1

Credit Card Reconciliation and Accounts Payable

I reconcile the credit card account when I get the statement.  When I'm finished, I look at the new balance and the due date.  This tells me when and how much to pay.  It's usually about 3 weeks away.  Isn't QB supposed to remind me to pay it? 

 

That's why I've always used a bill at that point.  After reading this, I suspect that if I make the bill date, due date, and check date the same then I don't have to worry about the balance being in the wrong place and it will show up on the pay bills screen until it's paid on the due date. 

 

If not, I guess I could use Outlook reminders to let me know when to pay bills :0 

Highlighted
Level 1

Credit Card Reconciliation and Accounts Payable

There's nothing wrong with reclassifying a portion of your credit card debt as accounts payable as both are current liabilities. From a financial reporting standpoint, both accounts would be included in the same line item for presentation. This could actually be a good way to track minimum payments to ensure they are not missed and you're not subject to late fees.

 

Actually, AP is less conservative than the credit card account, since normal payment cycles are mush shorter than the 1 year current liability cycle. You might disagree with the methodology, but using this method in no way implies the controller doesn't know the difference between CC and AP accounts.  

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