One of the things I’ve been asked in the past was how we track our credit cards with Lizzy, to insure that when we run our Balance Sheet, it accounts for everything we’ve done. Another reason for wanting to keep it in Lizzy on an on-going basis is to minimize the amount of work at the end of the month to reconcile all of the accounts and cards. In this blog entry I’m going to walk you through, step by step, how to deal with credit cards and how to enter payments at the end of the month against those accounts.
Lets get started:
1) We’re going to go to the Chart of Accounts first and create a new account for our credit cards. If you don’t already have a master account for 230.00.000 “Other Current Liabilities” then lets create it first. At the top, don’t select a master account, but fill in an account number of 230.00.000 and a name of “Other Liabilities” and select the checkbox that we want this to be a Master Account. Click the save button and now we’re ready to start creating our accounts.
Now select 230.00.000 in the master drop down, enter our first account for MasterCard as an example: 230.00.100 and a name of “MasterCard Balance“. Select the Account Type as “Credit Card“. Don’t select the master account check box on this one as we want this to be our account number we’re going to use later. Save and create one account for each card so that we can easily see the current balances on our balance sheet.
2) At this point you may also want to create an interest EXPENSE account to record interest charges into each month and if you want you can create a credit card fee expense account as well. These are really up to you how you want to record the extra charges.
3) Now go to Settings-> Accounting -> Bank Accounts and create a new account for each card and select the respective account for each. When you’re done you should now have separate bank accounts for all your checking accounts and all your credit cards. Make sure while you’re here you edit the Company checking account and select to have it be the default so that you don’t have to choose it manually all the time in checking.
4) Now is where the fun begins. As the people with the cards use them, start a policy that they turn in their receipts daily in order to allow you to enter them into the respective checking accounts listed now in Lizzy. You will enter them as if they were debit card entries and you’ll select the account each should go against in order to show properly on the balance sheets. There really is nothing special to do here. You will notice however, that this account will always hold a negative balance because we started at zero and charge things from there.
5) At the end of the month or throughout the month via the credit card companies website, we want to reconcile this account exactly like we would the real checking account. This allows us to easily track things that haven’t been turned in as they’re happening instead of waiting months later and trying to remember what happened or what something was for.
6) Eventually we will need to make a payment towards the credit card account and this is the only part you have a couple steps to deal with. I will list them here:
6a) Go into the real checking account and make a payment to the card vendor. Select the Flush Account (usually 199.99.999) to write the check against. Print your check as usual.
6b) Go into the credit card checking account and we’re going to enter a deposit for the same amount and select the same flush account for it.
Now what you’ll end up with is a balance transfer between the accounts, however, we had to do it manually because we needed to write a check that we could print. In the event you really do pay with a balance transfer you can skip this and just use that menu option to move the money between the accounts.
Hopefully you see that this a very slick way to track credit cards in the system and still maintain a simple flow of information from the purchase to reconciliation.