Paying invoices via PCard

The purpose of this document is to outline best practices for PCard transactions where the PCard is paid via automatic debit .  We want to ensure that:

1. The payment made to the PCard company is reflected in the bank G/L 
2. Vendor history is maintained from PCard transactions
3. Accounts are expensed appropriately

The following steps will enable the entering of invoices to vendors that are paid via PCard, without clearing to Accounts Payable or hitting the bank; rather, they will clear to a PCard holding account that will then be relieved when an invoice is entered and subsequently paid to the PCard company.

1. Create a new bank code.  No bank account is applicable so just enter a bogus number.  Do not suppress EFTs.
   
    
2. Create a PCard holding G/L account to which invoices will be cleared for vendors paid via credit card.  At the end of the process, this account will net to zero but we will see amounts going in and out of this account three times. 

My Demo:  66-917-6-300-001

1. Create two new batch codes, specifying the new bank code created above.   These are to be used:
   1. when entering invoices to vendors paid via credit card (IPCD in this example – see Figure 1)
   2. when entering invoices to pay the PCard company (PPCD in this example – see Figure 2)

IPCD -
 66-917-6-300-001

PPCD
 66-917-6-300-001

 

1. In Vendor Management, modify the credit card vendor as well as the vendors for the transactions to be invoiced: under Banking Information check the EFT Payment check box and add information for the bank, transit and account number.  (For vendors that will never be paid directly, it is recommended to enter bogus information here as a further safeguard against the eft file being sent to the bank accidentally.)  Since payment will have been made outside of the system, the resulting EFT file can just be deleted. (Setting all of these vendors as eft means that there will not be any outstanding cheques that would then have to be cleared manually, since eft payments are all created as cleared when created.)
2. Using the first batch code above, enter the invoices for vendors paid via PCard.  (These invoice will be referred to as transactional invoices for the sake of this document.)  Accounts will be expensed (debited) as usual, but the offsetting credit will be made to the PCard holding account created above (Step 2) as specified in the batch code, instead of the usual Accounts Payable clearing account.  (This begins the first ‘in and out’ cycle for the holding account.)
3. Using the second batch code above, enter the invoice to reflect the payment to the credit card company.  (This will be referred to as the PCard Invoice for the sake of this document.)  Expense the PCard holding account created above in step 2.  This will debit the holding account, completing the first cycle of ‘in and out’ transactions to that account.  The same account will also be used for the credit entry since it is the clearing account for this batch code as well.  (This begins the second ‘in and out’ cycle for the holding account.)
4. Run a cheque run for the applicable PCard bank code as set up in step 1.   The PCard invoice will be paid from the actual bank account (coming from the batch code), with the credit entry offsetting to the holding account (completing the second ’in and out’ cycle for the holding account (begun in step 6)).  Since the batch code for the transactional invoices contained the holding account for both the clearing and bank accounts, the system will credit and debit the holding account when ‘paying’ these invoices (this is the third ‘in and out’ of the holding account).  No need to print cheques or EFT notifications since the vendor has already been paid via automatic debit; the EFT file can just be deleted.

The journal entries created in my test are as follows:

Same journal entries, sorted and subtotalled by G/L:

• Expense account – $1800 debit
• Bank account – $1800 credit
• Holding account – nets to zero

The three cycles of ‘ins’ and ‘outs’ for the holding account:

1. Transactional invoices – clear (credit)                       1^st side of 1^st cycle            Step 5
2. PCard invoice – expensed (debit) to holding          2^nd side of 1^st cycle           Step 6
3. PCard invoice –clear (credit)                                        1^st side of 2^nd cycle           Step 6
4. Pay run clears offset from PCard invoice–(credit) 2^nd side of 2^nd cycle          Step 7
5. Pay run clears offset and pays transactional
   invoices – both to holding                                             both sides of 3^rd cycle     Step 7