A card sale is not money in the bank. The terminal records the full price today; the provider pays you a day or several days later, often in one lump covering more than one day’s trading and usually with its fees already taken off. A card payment clearing account holds the takings in between. Sales are recorded at the gross amount when they happen, and the clearing account is emptied when the payout lands.
What happens if you skip it
Posting each payout straight to sales looks simpler, and it is wrong in three ways. Sales are understated by the fees. Output VAT is understated too, because VAT is due on the full price the customer paid, not on what the provider passes on. And takings get dated to the payout day rather than the trading day, so a month’s figures pick up the last days of the previous month and miss its own final days.
One day’s takings, from till to bank
A gift shop closes on Friday with card takings of £2,460.00 on the till report, all standard-rated. The end-of-day entry:
| Account | Debit | Credit |
|---|---|---|
| Card payment clearing | £2,460.00 | |
| Sales | £2,050.00 | |
| Output VAT | £410.00 |
On Tuesday, the provider pays £2,421.87 with £38.13 of fees deducted:
| Account | Debit | Credit |
|---|---|---|
| Bank | £2,421.87 | |
| Card processing fees | £38.13 | |
| Card payment clearing | £2,460.00 |
The clearing account returns to nil. If your provider invoices fees monthly instead of deducting them from each payout, the payout equals the takings and the fees are posted when the invoice arrives. Whether VAT is shown on those fees depends on the provider and the service, so check the provider’s invoice or statement and code it to match; do not assume either way. Bank charges and interest in bookkeeping goes into the fee side in more detail.
Card terminal settlements
The settlement report from your provider (sometimes called a payout or remittance report) is the document every clearing entry is matched against. Download it for each payout rather than relying on the bank statement line, because the report shows what the single bank amount is made of. Typically it lists:
- the trading days or terminal batches included
- gross card takings for each batch
- refunds processed through the terminal
- fees, broken down by card type or as one charge
- chargebacks and chargeback fees
- reserves held back or released, and other adjustments
- the net amount paid
Three timing patterns cause most confusion:
- Weekend batching. Friday, Saturday and Sunday may arrive as one Tuesday payout. Match it to all three end-of-day entries.
- Till close versus batch cut-off. If the terminal batch closes at a different time from the till, a late sale can sit in the next day’s batch. The clearing account will show a small timing difference that clears next day; it is not a loss.
- Month end. Takings from the last trading days of a month are often paid out the following month. The clearing account carries a debit balance at month end equal to those takings. That balance is correct and should be checked, not forced to zero.
Refunds and chargebacks
A refund put through the terminal reduces the next payout, so it goes through the clearing account too. A £60 refund on a standard-rated sale:
| Account | Debit | Credit |
|---|---|---|
| Sales | £50.00 | |
| Output VAT | £10.00 | |
| Card payment clearing | £60.00 |
A chargeback is different: the cardholder’s bank reverses the payment and the provider deducts it from your payout, usually with a fee, before you know whether you can defend it. Move the disputed amount out of clearing into a separate disputed card payments account so the clearing account still reconciles. If you win the dispute, the money comes back and the disputed account clears. If you lose, the right treatment depends on whether the goods were returned or not, so follow chargebacks and disputed card payments rather than reversing the sale automatically.
Reconciling the clearing account
At each month end, the clearing account balance should equal card takings recorded but not yet paid out, less any refunds not yet deducted. Work through it like this:
- List each payout in the month and tick it to an end-of-day entry or group of entries.
- Confirm that the gross, fee and refund figures in your journals match the settlement report, not your own estimate.
- List what is left on the account: it should be the final day or days of trading, which you can find on the first payout of next month.
- Investigate anything older than the provider’s normal payout delay. It is usually a missed refund, a chargeback posted as a fee, or a takings figure keyed twice.
Many businesses do the daily side of this as part of cash-up and card reconciliation.
Where the balance appears and what to keep separate
A debit balance on the clearing account is money owed to you by the provider, so it is presented within other debtors in the balance sheet, not as cash at bank. Keep one clearing account per provider, so each one reconciles to its own reports. Amounts a provider holds back for longer periods as security belong in a separate account for payment processor reserves; mixing them in makes the clearing account impossible to clear. Online payment platforms that pay out on their own schedule work in the same way, each with its own clearing account.