Clearing Accounts 101

Overview

Clearing accounts are a simple but powerful accounting tool that helps bridge the gap between when you make a sale and when the money actually hits your bank account.

What is a Clearing Account?

Think of a clearing account as a temporary holding room for your money. It's an account in QuickBooks Online that temporarily holds transactions until they're ready to be moved to their final destination - usually your bank account.

A clearing account should always end up with a $0 balance when you're done using it, because you're essentially moving money from one place to another, not creating or destroying it.

Other names you might hear:

  • Holding account
  • Wash account
  • Transit account
  • Suspense account

Why Do Payment Processors Need Clearing Accounts?

When you process credit card payments through services like Square, Stripe, or Mindbody Payments, there's usually a delay between when you make the sale and when you receive the money. Here's what typically happens:

  1. Monday: You sell a $100 service and charge the client's credit card
  2. Wednesday: The payment processor deposits $97 to your bank account ($100 minus $3 processing fee)

Without a clearing account, your books would show $100 in sales on Monday, but only $97 showing up in your bank account on Wednesday. This creates a confusing mismatch that's hard to track.

How FlexBooks Uses Clearing Accounts

Good news! FlexBooks automatically sets up and manages clearing accounts for you. Here's what happens behind the scenes:

  1. When you make a sale: FlexBooks records the full sale amount (e.g., $100) to a clearing account
  2. When you receive the deposit: You'll transfer the net amount (e.g., $97) from the clearing account to your bank account
  3. Monthly fee accounting: You'll record the processing fees (e.g., $3) as an expense, which also reduces the clearing account
  4. Result: The clearing account balance returns to $0, and your books accurately reflect both your sales and your expenses

Real-World Example

Let's say you're a yoga studio owner using Mindbody Payments:

  • Day 1: You sell $500 worth of classes and packages
  • FlexBooks records: $500 to the "Credit Card Processor" clearing account (Balance: $500)
  • Day 3: Mindbody Payments deposits $485 to your bank account ($500 minus $15 in fees)
  • You transfer: $485 from "Credit Card Processor" to your bank account (Balance: $15)
  • End of month: You record $15 in processing fees as an expense (Balance: $0)

Your books now accurately show $500 in sales, $15 in processing fees, and $485 deposited to your bank - everything balances perfectly!

Your Side: Clearing the Account

FlexBooks puts the money into the clearing account. Taking it back out is your side, and it is one step each time a deposit lands in your bank.

Record each payment processor deposit as a transfer out of that account, rather than as income. Here's how:

  1. In Bank transactions, on the Pending tab, click your payment processor deposit
  2. Make sure the row is set to Categorize rather than Match
  3. Set Transaction type to Transfer
  4. Set Transfer Account to your clearing account
  5. Click Post

Make It Automatic: Create a Rule

Once you have recorded one payout as a transfer, you can have QuickBooks do the rest for you.

Check one thing first. Look at the payouts already waiting in your bank feed. If any of them are from days we have not synced for you yet, leave step 7 turned off for now. A rule that posts by itself will record those older payouts into your clearing account, and the sales behind them are not in QuickBooks yet. Turn it on once your books have caught up, and send us a message if you are not sure.

  1. In Bank transactions, on the Pending tab, click one of your payment processor deposits to open it.
  2. Click Create rule.
  3. Give the rule a name you will recognize later, such as Mindbody payouts.
  4. Set it to apply to Money in, in the bank account your processor pays into.
  5. Set the condition to Description, then Contains, then your processor's name. For Mindbody Payments, use Mindbody on its own. Banks print the rest of the description differently from one another, so the shorter the better.
  6. Set Transaction type to Transfer, and set the account to your clearing account.
  7. Turn on Auto-post, under Automatically confirm transactions this rule applies to. This is the step that makes it hands-off, and it is the one to leave off if the check above applies to you.
  8. Select Save.

From then on, every payout that arrives in your bank feed is recorded as a transfer out of your clearing account, with nothing left for you to click.

Making sure the rule catches every payout. QuickBooks keeps two versions of every bank line. The description is a tidied-up version, and the bank text is exactly what your bank sent. A rule set on one of them will not match the other. If your rule is catching nothing, open it and switch the condition between Description and Bank text.

Your rules live under All apps, then Accounting, then Rules, and you can edit them there at any time.

Would you rather we did it? Send us a message and we will set the rule up for you.

If Your Rule Stopped Working

Your rule recognizes each payout by the name your bank prints on it. If your payment processor changes that name, the rule stops recognizing the payouts, and they start waiting in your bank feed again. Mindbody did this on September 3, 2026.

To see the name your bank is using now:

  1. In Bank transactions, on the Pending tab, click one of the payouts your rule missed.
  2. Look at the BANK DETAIL line, and keep it open for the steps below. Each bank prints this line a little differently.

To fix the rule:

  1. Go to All apps, then Accounting, then Rules.
  2. Click Edit on your payout rule.
  3. Check that it applies to Money in, in the bank account your payouts arrive in.
  4. Set the condition to Bank text, then Contains. In the box next to it, type the processor's name exactly as it appears at the start of your BANK DETAIL line, and stop before the letters and numbers that change on every payout. For example, if your BANK DETAIL line reads MINDBODY Payment MINDBODY P ST-Q1A6Y3F7J7D8, type MINDBODY Payment.
  5. Click Test rule. It should say the rule will apply to your waiting payouts. If it says 0, check what you typed against the BANK DETAIL line, letter for letter.
  6. Make sure Auto-post is turned on.
  7. Click Save. The waiting payouts are transferred to your clearing account right away.

Don't click Add on the waiting payouts while you do this. QuickBooks often suggests Sales for them, which would count that money as income a second time.

Would you rather we did it? Send us a message and we'll fix the rule for you.

The Bottom Line

Clearing accounts might seem complicated at first, but they're actually making your life easier by:

  • Keeping your sales and bank deposits organized
  • Making it easy to track processing fees
  • Ensuring your books balance correctly
  • Simplifying bank reconciliation

Remember: FlexBooks does the heavy lifting by setting up and managing these accounts automatically. Your part is to record each processor deposit as a transfer out of the clearing account, and a rule can do that for you automatically.

Need Help?

If you have questions about clearing accounts or need assistance with your FlexBooks setup, our support team is here to help. We can:

  • Walk you through your first few transfers
  • Create custom rules for your specific payment processors

Related Resources:

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