The symbiotic relationship between 17hats invoicing and bookkeeping makes reporting revenue and sales tax an automatic process. There is no need to decipher the amount of sales tax to pull out from an invoice, or how to break down deposits from your credit card processor to put towards each invoice.
There are a few things you need to be aware of so that you understand the flow of bookkeeping.
Bookkeeping is on Cash Basis. That means the date of the payment is also the date of the bookkeeping record. 17hats uses this to generate your Profit & Loss and Sales Tax reports.
When a partial or full payment is received, not only will the invoice reflect the new balance, the bookkeeping module will create a transaction for the sale (based off the income category assigned to the invoice item), and a transaction for sales tax when applicable (based off of the sales tax category assigned)
So what do you do with the deposit transactions from your bank feed? You should categorize them as "Transfer between accounts". Categorizing as "Transfer between accounts" eliminates the "double post" effect of counting the revenue twice. If you're comfortable enough, you can also assign the deposit downloaded from your bank's website to the original payment, by clicking the arrow to the right of the Amount, then select 'Apply to an invoice', then in the pop-up, click the 'Assign to payment' drop-down, and find the invoice payment the deposit is associated with.
PayPal, Square and Stripe do not report the merchant fee to your bank. Meaning what you receive in your bank account is less than what the client paid for, so you'll need to create a New Expense entry for the merchant fees to account for the difference. Or, you can do one entry for the entire month's merchant fees, available from your payment processor's website.
Below is an example of what proper bookkeeping should look like. Line 1 is manually entered as an expense. Line 2 is classified as a Transfer between accounts, and does not count towards revenue. Line 3 records the revenue.
You can also click the button below to see more about what to do with bank deposits.
The first step to using 17hats Bookkeeping & Reporting is to connect any bank and credit card accounts you use for your business. You can do this by clicking on the "Connect Account" button on the Account Settings > Bookkeeping Options page.
Here you can connect your account from over 20,000 financial institutions which will import transactions from up to the most recent 90 days, by searching for your bank within the search bar.
After finding your bank, click the correct account type to connect, then enter your bank login information to connect with the account(s), which will then download up to the most recent 90 days of transactions.
After that, you can set up your transaction categories on the main bookkeeping options page
Here you'll see a lot of basic categories which you can edit or if you have any specific categories you want to use, you can add that using the "Add Category" button.
Once selected, you'll see a pop-up to enter the category information.
Next let's look at the main Bookkeeping tab where you can find your transaction history. These are the pages where you'll categorize and verify your expenses, which will put them on the Profit and Loss report for an accurate accounting.
The search filters will allow you to view transactions from each bank account, a specific category, type of transaction (income or outgoing payment (expense)), or by date range, amount (expense payments should be entered as a negative amount) or keyword.
You can also edit your transactions as needed from this page and generate reports.
Feel free to reach out via Live Chat if you still have any remaining questions and we'll be happy to help out!
* This feature may not be available on all plan types.
Keywords: Bookkeeping, Invoices, Sales Tax, Reporting, Cash Basis, Accrual Basis