Credit Card Payment Process

You can pay vendors using a credit card bank account type. The setup and processing for these credit card payments is a little different than the process to pay a vendor using a check or EFT. Below are the steps to follow to set up and process the credit card payment all the way through to paying the credit card company.

Setup:

  1. Set up a GL Liability account (an AP type account) for the credit card payments. It is best to have a liability accounts for each credit card which will be reconciled. If several physical cards are paid from one statement, those would all use the same account.
  2. (Optional) You may choose to set up an AP Distribution Code for use when paying invoices with credit cards. The primary difference between this Distribution Code and any other will be that by doing this, a second AP Account can be used for the liability in the period between when the invoice is posted and the prepayment is posted (see below).

    3. This should not be the same account as in Step 1 above. This step can be skipped and the common Distribution Code and AP Account can be used if preferred.

  3. Set up a credit card vendor ("VISA", or whatever). If the optional Distribution Code was created in step 2, use it when setting up this vendor. For the vendor's default GL account, use the liability account set up in step 1.
  4. Set up the "Bank" Account, in either System Manager or Bank Reconciliation, noting that it will not be an Account Type of "General" but a "Credit Card" Account Type. You will be required to enter the Vendor ("VISA", etc.). Unlike "regular" bank accounts, you will not enter a GL Cash Account when setting this account up, as it will automatically be the liability account set up in the vendor (Steps 1 and 3).

Processing the expense:

  1. Process an expense or item invoice as normal, whether through AP or PO, but if the invoice will be paid by a credit card, make sure to change the Distribution Code to the one related to this credit card account, if you set up the optional Distribution Code in Step 2 above.
  2. Enter the lines for expenses or items (the bottom section) as you normally would with whatever expense or inventory GL accounts are appropriate. Confirm the invoice totals.

    3. When entering a PO you will need to enter an invoice prior to entering a payment amount and credit card bank.

  3. Click on the Payment tab and enter the amount charged to the credit card as the Prepayment amount. Other payment-related boxes will now become available for entry. Enter the payment number (comparable to a check number that would correspond to the payment), payment date, and (credit card) Bank Account ID. Verify the other fields. If there is any remaining payment amount, it will be entered in the Payment fields in the lower right of this payment entry area.
  4. Process the remaining payables or PO batch, print reports and post. GL entries will be debit to expense or inventory, credit to the AP Account (may be a unique GL AP account if Setup Step 2 was performed.)
  5. Remember that because one or more invoices were "prepaid" by credit cards, it will be necessary to run an AP check cycle using the (credit card) Bank account before these prepayments will be posted through.
  6. When prepayments are posted, the GL entries from this post will be a debit to AP, and a credit to the Vendor GL account. At this point, the Vendor GL account becomes the AP Liability Account for the credit card balance: the liability is not in the AP GL Account. Bank Reconciliation will show a charge transaction in the credit card bank account.

Processing of the Credit Card Statement:

  1. When you get your credit card statement, you can use Bank Reconciliation to "clear" (reconcile) the invoices and credit card account payments by logging into Bank Reconciliation, Reconciliation and using the BR Cleared Transactions process with the statement just like one would with a bank account statement.
  2. When running the Reconciliation Report, the credit card statement should balance to its liability account (the Vendor GL account) just like a bank statement balances to its cash account.
  3. The credit card statement would then be entered, in total, as an AP invoice. The GL "expense" distribution will be the GL liability account entered for the vendor in the Setup step above.
  4. When posted, that will move the liability amount (debit) from the credit card liability account to the AP liability account (credit).

Paying the Credit Card Statement:

  1. The credit card statement is selected and paid via check like any other invoice using an operating cash account (not the credit card bank account).
  2. When the payment is posted, Traverse will debit the AP account and credit the Cash account, while automatically posting a payment transaction to the Bank Reconciliation Bank Account tied to the credit card for use in reconciling the next credit card statement.
  3. When the payment is posted to bank reconciliation, a payment entry is made to the credit card bank account to show the credit card has been paid. You will see this in the Reconciliation, Cleared Transactions screen.

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