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Recording Processing Fees on Invoice Payments with Credit Memos

When a customer's payment is deposited net of a processing fee, use a credit memo on the original invoice to post the fee to Bank Fees (or any other account) — no journal entry needed.

Written by Michael Herchen

The payment came in net of a processing fee — how do I record it?

If a customer's payment is deposited into your bank account after a processing fee is taken out (so the deposit is less than the invoice total), you don't need a journal entry. Use a credit memo on the invoice instead.

Short answer: Open the invoice, click Create Credit, and post the fee amount to Bank Fees (or whichever account applies). This reduces the invoice's outstanding balance by the fee, so the remaining balance matches the actual deposit you received — and you can match it as usual.

Step by step

  1. Go to Revenue > Invoices and open the posted invoice tied to this payment.
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  2. Click the invoice's menu and select Create Credit.
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  3. In the New credit memo window, search the account field for the account the fee belongs to — most commonly 68600 - Bank Fees (an Expense account). You can also select any other Asset, Liability, Revenue, or Expense account if a different situation applies.
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  4. Enter the fee amount as the credit amount (not the full invoice amount). For example, on a $100 invoice with a $10 processing fee, enter $10.
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  5. Click Post.

⚠️ Note: If your invoice does NOT have an outstanding balance, this option will not appear for you.
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What happens next

Once the credit memo is posted, the invoice's outstanding balance drops by the fee amount — in the $100 invoice / $10 fee example, the outstanding balance becomes $90. When you match the actual deposit ($90) to the invoice, it will:

  • Mark the invoice as fully paid

  • Record the $10 as a Bank Fees expense (or whatever account you selected)

This keeps the invoice, the fee, and the cash deposit all reconciled without any manual journal entry.

This also works for other deductions

A credit memo isn't limited to processing fees — it can offset an invoice balance to any account. For example, if a customer only pays part of an invoice and the rest is uncollectible, you can create a credit memo to Bad Debt Expense for the unpaid portion, then match the partial payment to bring the remaining balance to $0.

👉 Need a video walkthough? Check it out here.

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