A client runs everything through Square and does not have it connected to QuickBooks. The Square deposits just show up in the bank feed. The fast move — the one that creates a cleanup six months later — is to categorize each deposit as sales income and move on. Do not do that.
Here is why it is wrong, and the clean way to record Square by hand.
The deposit in your bank feed is already net
Square does not hand you your gross sales. It takes its processing fees, and any refunds, out first, then deposits the rest. So a day of $1,000 in sales with $29 in fees lands in the bank as a $971 deposit.
If you book that $971 as income, two things go wrong. Your gross revenue is understated — the books say $971 when the business actually sold $1,000. And the $29 in processing fees never appears anywhere, so you cannot see what Square is really costing the client. Over a year that is thousands of dollars of revenue and expense that simply are not on the P&L.
The clean way: a clearing account
Set up a bank-type account in the chart of accounts called something like Square Clearing. Then, for each payout (daily or weekly, match how Square deposits):
- Record the gross sales as income into the clearing account. This is the full amount the client actually sold, from the Square sales report — not the deposit.
- Record the Square fees as an expense out of the clearing account, to a merchant-fees or processing-fees expense account.
- Match the net payout in the bank feed as a transfer from Square Clearing. That is the deposit that actually hit the bank.
Done right, the clearing account nets to zero after each payout: gross sales in, fees out, net transferred to the bank. Gross revenue is correct, the fees are visible, and the bank reconciliation ties. If the clearing account is not landing near zero, something is missing — usually a refund or an adjustment Square made that you have not booked yet. That non-zero balance is a useful early warning.
If you have sales tax collected through Square, break that out too, so the tax sits in a liability account instead of inflating income. The clearing account is the natural place to split it.
Do not turn on the integration on top of this
This is where a lot of Square cleanups are born. A file is being recorded through the bank feed, and then someone connects the Square integration "to save time." Now both sources post the same sales: the integration brings in the transactions, and the bank feed brings in the deposits, and QuickBooks counts them twice. Every sale is doubled, the P&L is fiction, and untangling it is days of work.
Pick one method as the system of record for Square. If you are recording by hand through a clearing account, leave the integration off. If you switch to the integration later, stop the manual entries on the same date so the two never overlap.
Checking a file that already has Square recorded
When you inherit a file that runs on Square, do two quick checks before you quote anything:
- Compare Square's gross sales for a period to the revenue in QuickBooks for the same period. If revenue is lower, the net deposits were probably booked straight as income and the fees are missing — that is a re-categorization job across every deposit.
- Look for the same Square money coming in twice — once through an integration and once through the bank feed. Duplicate income is the expensive one to clean up.
Both of these change how many hours the cleanup takes, which is exactly the kind of thing you want to know before you put a price on the job, not after. Payment platforms and their fees are a classic spot where the mess hides — right next to undeposited funds.