Square and Clover deposits: why they never match sales, and how to reconcile them
Published on Published
A card deposit is one batch of card sales, less fees and refunds, sometimes with tips inside it. Cash, gift cards and online orders sit somewhere else.
Short answer: a deposit from Square, Clover, Moneris or any other card processor is not a day’s sales. It is the card sales for one batch, less refunds and chargebacks, often less the processing fees, and sometimes including tips that belong to staff. Cash sales, gift cards and online orders are recorded elsewhere. Reconcile the point-of-sale sales summary to the deposits and the cash count each day or week, and record sales, fees, tips and tax in their own accounts.
What is inside a card deposit
| In the POS report | Where it goes in the books |
|---|---|
| Gross sales, by tax category | Sales accounts, split so taxable, GST-only and exempt sales stay apart |
| GST and PST collected | GST payable and PST payable, not sales |
| Discounts and refunds | Contra-sales, recorded as reductions of sales |
| Tips on card payments | Tips payable to staff, not revenue |
| Processing fees | An expense, whether deducted from deposits or billed monthly |
| Gift cards sold | A liability until the card is redeemed |
| Cash sales | The cash count and the cash deposit, matched to the POS cash total |
| Chargebacks and holds | A receivable or a reduction of sales, once resolved |
Reconciling, step by step
The mistakes that show up at year end
- Recording deposits as sales, which mixes tax, tips and fees into sales and leaves the tax and tips owed off the books
- Leaving card tips in revenue, which overstates income and confuses payroll
- Item tax settings wrong in the POS, so PST is charged on exempt items or missed on taxable ones
- Cash sales never recorded because they never reached the bank
- Gift cards booked as sales when sold, then again when redeemed
Where it differs by business
- Restaurants and cafés: card tips, cash tips and a tip-out to the kitchen, plus PST and liquor rates set item by item
- Retail shops: refunds and exchanges, and stock counts that the POS inventory has to agree with
- Salons and spas: prepaid packages and gift cards, which are liabilities until the service is given, and tips by card
Records to keep
Keep the POS end-of-day reports, the processor’s monthly statements and the cash count sheets with the books. Records generally have to be kept for six years from the end of the last tax year they relate to, and electronic records have to stay readable, so export the POS reports before you change systems.
Questions people ask
Why does my Square deposit not match my sales?
Because a deposit is one batch of card sales less refunds and often fees, sometimes with tips inside it. Cash, gift cards and other channels are not in it. Reconciling each deposit to its batch makes them agree.
How do I record Square or Clover fees?
As an expense, at the full amount, with the card sales recorded gross. Where the fees come out of each deposit, the deposit is short by the fees, as well as by any refunds, and it may include tips and tax.
Are card tips part of my sales?
No. Tips paid by card belong to staff, so record them as owed to staff until they are paid out. How they are treated for payroll depends on whether they are controlled or direct tips.
How do I record gift cards?
A gift card sold is a liability, not a sale. It becomes a sale when the customer redeems it.
How long do I keep POS reports?
Generally six years from the end of the last tax year they relate to, in a readable form, along with the processor statements and cash counts.
Restaurants: PST, GST and tips →
Want this handled for you
This is the work we do for clients every month. Tell us what you sell and where your books stand, and a written plan and a fixed monthly price follow within one business day.
Year-end books and T1 and T2 returns, done for you →
info@orbisaccounting.ca