Expense Showing as Profit


We have just started using the GoCardless system. In order to cover our costs, we charge a fee to customers who use this system.

When the payment is collected, it then adds a credit to the customers account for the value of this charge. This then makes it look as though we owe the customer money that we don’t.

To correct this, we have had to add a line to the invoices. There is an option to charge the transaction to the ‘Bank Charge [Expense]’ ledger. However, the double entry system is seeing this as an income as opposed to an expense, which means that we are showing a higher profit.

I know that the total amount is only a few pounds for the whole year, however, this could begin to affect our tax liability.

If you want to charge your customers a separate line item to cover transaction charges then that additional bit will count as your turnover and it will counter with transaction processing fee in P&L so overall net profit should not increase provided both amounts are same

But the GoCardless fee isn’t being logged as a charge. When the payment is brought over from their systems, it marks the entire balance (including fees) as a payment, which is then deducted from the invoice balance.

As the fee is surplus to the value of the invoice, it credits it as a prepayment to use against the next invoice.

Are you under invoicing your client in first place ? Perhaps give us some example with figures what exactly are you doing on system i.e how much invoice should be for, how much is sent for and how much received?

No. The invoices are right.

Item £100.00
Total £100.00

Client chooses to pay through GoCardless

GoCardless charge added by us: (1.1%) - £1.10.

Total taken through GoCardless £101.10

3-5 days later

Payment (£101.10) received and assigned to clients invoices.

Quick File logs transaction as a payment. It then assigns £100.00 to the invoice, and the balance (in this case £1.10) to the client as a credit.

This £1.10 credit is not the intention, as it is added to the invoice to cover the charge we pay to GoCardless.

After the invoice is paid, I modified the invoice to add the charge to the invoice. I do this post-payment for two reasons. 1) to prevent the GoCardless system adjusting the payment amount, and 2) to remove the credit from the clients account.

I logged this new line as an expense. However, in the double entry system, it has still recorded this as an income, which then affects the final profit line. This is because it looks like the amount of expenses has been reduced.

You are under invoicing your customers in first place. Have you agreed with your customer to charge them transactions fees if not there might be legal consequences for it. Most merchant providers don’t allow transactions fees to be passed on to end customer as separate add-on because its not adding any value to your own product or service.

Coming back to your situation, you cannot ever recover 100% transaction fee on this % model BUT with gocadless it is kind of possible as they cap max transaction to £2.

Best is you incorporate £2 into your invoice and record gocardless charges as normal, it will contra the net profit effect and you dont have to do post adjustment for customers invoices

I am going to be honest. You are completely missing the point.

We are not under invoicing. The customers choose which method they pay by. We are not a dictatorship. We are only adding the additional charge to invoices because the GoCardless transaction fee is mis-posted by QuickFile in the first place which is what this post was intended to find a solution for.

To clarify the legal issues, this is stipulated in our T&Cs on each invoice and it is perfectly clear when the customer submits their details to GoCardless. I am a law student - trust me, it’s covered :wink:

Funnily enough, the 1.1% transaction fee that we have added to GoCardless transactions does cover the 1% fee that we have to pay to GoCardless. Again, this is covered. I think I would have been able to work this out before I even went to school at the age of 4. It is pretty obvious (to me anyway) that 1.1% is greater than 1% (the cost of GoCardless charges, capped at £2).

To stop this endless rubbish which is going no further to solve my original problem, I do not need accounting advice. I am also an accounting student, and can confirm that the accounts are correct and accurate to the best of my knowledge and belief.

This was posted here for the attention of @QFMathew.

Thank you for your concern.

The 1.1% you are charging your customers is income for you. You should have £101.10 money in to your GoCardless merchant account, then at some point £100.09 arriving in your current account (101.10 less 1%) which is a transfer from the merchant account to the current account. The remaining £1.01 sitting in the merchant account is the thing you need to treat as an expense.

You can either do that for each transaction individually, or batch them up and log one purchase at a convenient time (do GoCardless send you a monthly invoice detailing all their fees, like Stripe et al do?). Mark the purchase as paid from the merchant account to balance everything back to zero.

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The problem I have though is that QuickFile is treating the whole amount, including the fee that GoCardless retains, as a payment for the client. Therefore, if we are not quick on the ball when the payment is confirmed, then it looks like the client has a credit balance.

I am aware that the GoCardless fee is an expense. However, the problem that I have is how QuickFile is treating the amount that I am marking as an expense. On the Profit/Loss report, it is coloured Green, which is reducing the amount of total expenses, hence increasing the profit.

Hi @PC6

If you were to raise an invoice and charge your client a 1.1% fee through QuickFile for the use of GoCardless, then as you’ve rightfully said, this will then show as credit on the client’s account. How you then handle this is up to you - you can either amend the existing invoice, or you can raise a new invoice. Unfortunately, there’s no automated way of handling this part, so it will sit on the clients account until it’s dealt with.

What you may find easier, especially in the case of direct debits given they’re only a small fee and a percentage, is to add it into your prices and not to pass on the charge. Or you could even add it to an invoice prior to requesting the amount via GoCardless, remove the charge via QuickFile, and assign that invoice line to a different nominal code (you would need to set this up if you haven’t already - the number would vary)

4000 Invoice value - 100.00
40xx Transaction charge - 1.10

While this isn’t ideal, it would avoid the situation of having it sitting on a clients account as a prepayment.

I hope this helps.

That’s what I have been doing. Is it possible that this might become automated in the future?

In the mean time, I will do as you have suggested. Thank you.

The problem is you are making a 1.1% additional charge and not providing a paper trail. If the client has a choice of payment method after receiving the invoice then you need to raise a second invoice for the fee or provide an amended invoice to cover the fee. if you are taking more money through Direct Debit than you are billing then you are at risk of the client demanding all the money back through the DD Guarantee. Certainly a business client would demand an invoice for the full amount taken or their books wouldn’t balance!

Secondly, don’t treat the fee on the invoice as a banking expense, it’s money coming in not going out. GoCardless is a supplier, as suggested by ian_roberts raise purchase records to the value of fees they have charged and pay them from your GoCardless merchant account.


It was one difficulty that we looked at before this feature was implemented originally, but because of the way people chose to charge the fees (either as a new invoice or as a new line on an existing invoice), it causes a bit of a problem when it comes to automation. For example, what happens when a client pays 5 invoices at the same time?

As with most parts of the system, we’re open to suggestions, and you’re more than welcome to start a feature request thread. We’ll happily investigate it further if there’s enough interest from the community.

I hate to wade in here, but I feel I have to stand up for common decency. This is a public forum, and one of the things that makes QuickFile so great is the friendly nature of the support forums, both from QF staff and others. This is quite different to the rather hostile nature of some other accounting forums.

@FaradayKeynes was giving valuable advice, for free. If it doesn’t work for you, that’s fine, but your response was (in my opinion) completely unacceptable. As a student, you clearly still have a lot to learn, and you’d be wise to respect those with more experience than you. You don’t have to take their advice, but you should be respectful.

Personally I’d like to thank @FaradayKeynes, @ian_roberts and all the other regular posters for giving their time on here. All the QF staff as well of course.


Couldn’t agree more, however, the vexatious comments were completely irrelevant to the problem that I had.

The advice was appreciated, but like your comments, bring no relevance to the hunt for a solution. If I wanted accountancy advice, I would have posted in the relevant forum.

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