Controlled tips are defined as tips that are payable to the employees on their next pay date, such as credit card tips. Recording these tips in the General Ledger can be confusing for business owners since these funds are deposited into the company bank account but are owed to the employees. Since these funds do not belong to the business, the deposit should be accounted for as a liability.
To account for credit card tips with your Xero integration, please follow the steps below:
Create a Tips Payable account in your Xero Chart of Accounts
To create this account in Xero, click "Settings" and then "Chart of Accounts."
Click Add Account. Under Account Type, select "Current Liability." Add an account code and name (we suggest naming the account Tips Payable or Tips Clearing account), then click Save. When credit card tip monies come into your bank account from the credit card company, allocate these tips to the Tips Payable Account.
Refresh accounts
Anytime a change has been made to your Xero chart of accounts, it's important to update this in OnPay by clicking Refresh Accounts before trying to map to a newly added account.
In OnPay, go to Company, then App Directory.
Click My Apps, then click Xero.
Click Refresh Accounts in the upper right of the Xero integration settings.
Map controlled tips
Scroll down to "Checking and Clearing Accounts", and select the Controlled Tips Clearing Account in Xero.
Going forward your controlled tips that were recorded under "Tips Payable" will be offset in your Xero Chart of Accounts with each payroll. If you need to send a previously completed payroll to Xero, please follow the directions found here.
Note: If your company does not break the credit card tips out from the income account when the monies come into your bank account, leave the Controlled Tips Clearing Account blank in OnPay. The income account will be offset by a Controlled Tips wage expense item.
v7.24