Credit card processing fees: Calculate total revenue when your business accepts cards


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Total revenue is the amount the customer paid; to calculate the ‘profit,’ you should subtract credit card processing fees

Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of Her book, “The Million-Dollar, One-Person Business,” was released in 2018. She writes “Your Business Credit,” a weekly column about small business and credit, for

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Dear Your Business Credit,

When your business accepts credit cards, how do you calculate “total revenue”?

Do you use the amount of the invoice – for example, $200 – or the amount that was actually deposited into your bank account – let’s say $189.50, in the example? – Aja

Dear Aja,

Great question. I had to address it in my own business not long ago and got advice from my bookkeeper:

  • When you accept credit cards, the “total revenue” is the amount the customer paid.
  • Assuming, in your example, the customer paid $200 on the $200 invoice and not a partial payment, the total revenue would be $200.
  • So, after you’ve created the invoice, you’ll need to give the customer full credit for the $200 invoice amount to indicate you received the payment.

See related: How high of a fee do businesses pay to accept cards?

How to enter credit card processing fees in your books

Once you’ve done that, you’ll need to record the processing fee.

  • I currently use QuickBooks, and my bookkeeper enters credit card processing fees in the “cost of goods sold” column there.
  • Any cost-of-goods-sold items appear in the “chart of accounts” in the program, where you can look at information such as how much you spent in one month on credit card processing fees.
  • So, continuing with your example, let’s say you paid a processing fee of $10.50, or 5.25 percent, when a customer used a bank credit card, such as Visa or Mastercard. (The 5.25 percent seems a bit high, by the way. The average credit card processing fee stands between 1.40 percent and 3 percent).
  • Once you subtract the $10.50, you will know your profit from the sale – in this case, $189.50 – assuming there were no other costs associated with the transaction.
  • When you run your profit-and-loss report in your accounting software, you’ll see that the “cost of goods sold” is subtracted from your total income to give you your gross profit. That’s different from your revenue.

If you’re more of a visual learner, you may find this video from Long for Success advisor Michelle Long on how to enter these transactions helpful:

Every accounting software is a little different, and they are constantly being updated, so you may have to consult the provider’s educational materials to find out how to enter a cost of goods sold.

  • For FreshBooks, another major accounting platform for small business, you can consult this guide.
  • For Xero Accounting, here is a a helpful video from the Business Boost Centre on how to enter credit card processing fees:

Make sure card payments are entered correctly in your books

In some cases, I’ve found that when I get a digital credit card payment, such as one made through the invoicing software, it is automatically entered.

You will want to double-check these entries to make sure all your credit card fees are being entered in a consistent way.

Otherwise, it will be hard to keep track of what you are spending on credit card processing fees.

I hope this explanation on total revenue and credit card processing fees was useful. And thanks again for your question!

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