When a client payment is made through Actionstep Payments to your business/operating account, Actionstep will automatically create the accounting transactions for that payment.

In this article, we explain the three types of transactions that Actionstep will automatically create and how they are calculated.

The Three Types of Accounting Transactions

When a client pays through Actionstep Payments to your business/operating account, Actionstep will immediately create transactions that will mark your invoice as paid.

After the payment, it can take two to three days to settle a credit card payment depending on your bank.

Settling means that the credit card holders bank has cleared the funds and they are ready to be deposited into your own bank account.

This two to three day delay means that another transaction needs to be created for the deposit of the funds into your bank account.

Each business day, Actionstep Payments will take any payments that have settled for that day and deposit the sum of those payments into your bank account .

At the same time, we will also total the credit card fees for those payments that have settled and create a separate withdrawal from your bank account for those fees.

To account for this accurately, we create three separate accounting transactions:

1. The invoice payment when a client pays
2. The bank deposit for all settled payments
3. The bank withdrawal for the fees of all settled payments

We explain how each work in more detail below.

Invoice Payment When a Client Pays

Each time a client completes an approved credit card transaction to your business/operating account it will be a payment against an invoice. At the time it is approved, Actionstep will create an invoice payment record for that invoice in Actionstep. The invoice payment will be able to be seen against the invoice and opened as if you had created it yourself.

As the funds will not be deposited into your bank account yet, the invoice payment will use a holding account that is created automatically when Actionstep Payments is setup in your system. See Understanding the Actionstep Payments Holding Account below for more details.

The Bank Deposit for All Settled Payments

Once a credit card payment has been submitted and authorized by your credit card company, there is a process for requesting the money from the credit card holders bank. This process can take two to three days to process. 

Once a payment has settled, it will be available in your Actionstep Payments balance. 

Each day, Actionstep will take the total of all payments that have settled and deposit them into your bank account. 

Actionstep will also create an accounting transaction for this deposit. This will appear in your system as a Transfer. The transfer will take the funds from the Actionstep Payments holding account and transfer it into your bank account. See Understanding the Actionstep Payments Holding Account below for more details on why the holding account is used.

The bank account that the money will be deposited into is set on the Add/Edit Payment Configuration.

The Bank Withdrawal for the Fees of All Settled Payments

Credit card transactions will incur fees and these are the responsibility of the firm to pay. 

Actionstep will automatically withdrawal the credit card fees for all payments that have settled from your bank account.

We create a separate accounting entry in Actionstep automatically whenever this is triggered. This accounting transaction will appear as a Firm Withdrawal in Actionstep.

The expense account that this withdrawal is set to and the sales tax (if any) applied will be applied to this withdrawal are set on the Add/Edit Payment Configuration

Understanding the Actionstep Payments Holding Account

If you were to create a payment record manually in Actionstep, you are asked to nominate the bank account as you create a bank deposit with the invoice payment. With Actionstep Payments, there can be a delay between the client paying you via credit card and the money coming into your bank.

To ensure the invoice payment and the deposit are both dated correct, Actionstep will create two separate transactions. Both will use a special holding account in your General Ledger. 

The credit card payment will be like any other invoice payment but the Actionstep Payments holding account will be set as the bank.

The deposit is a transfer from the Actionstep Payments holding account into your normal bank account.