What is a clearing account and why do you need one?

Overview

A clearing account is a temporary holding place for funds that have yet to be deposited into your bank account. For example, payments processed via a payment provider (such as Square, Paypal, Shopify etc.) will generally not be deposited into your bank account on the same day that the sales transaction takes place.

Clearing accounts allow for sales and other transactions to be recognised at the time when they occur. They allow for the management of this timing difference between the initial transaction occurring and the eventual amount being deposited into your bank account. When the relevant amount is deposited into your bank account, it will be offset against the initial transaction posted in the relevant clearing account/s.

Integration transactions posted to clearing accounts should be matched to corresponding deposits into the bank account. The clearing account acts as a way to segregate and contain integration-related transactions from your permanent accounts which allows for easier tracking and reconciliation. As the sales data is updated when you make the sale rather than after funds are deposited, clearing accounts helps to keep your financial records up-to-date.

How Amaka integrations simplify clearing accounts

Amaka integrations will automatically create the relevant clearing accounts in your accounting software during the setup process. These accounts will generally be a current asset type account. The balance in a clearing account will represent the total payments that have been paid by customers but that have not yet been deposited into the bank account. The current balance of the clearing accounts can be found in the Balance Sheet report.