What Happens When an EFT or Bank Payment Fails?
This article is for you if you take payments by bank debit through Mindbody. Depending on where you are and what you have named it, you may call it EFT, ACH, PAD or Direct Debit.
What you are seeing
One of your members has a balance in QuickBooks that is a long way from their balance in Mindbody. Usually QuickBooks says they owe far less than Mindbody does.
You may also have an asset account named after your payment method, “EFT” or similar, holding a balance that never seems to clear.
Why this happens
A bank payment is not finished on the day it is taken. Unlike a card, which authorises in seconds, a bank debit takes about a week to clear. Until then, Mindbody shows it as pending.
FlexBooks syncs the previous day’s sales, so when it reads that sale the payment is still pending, and it records the sale as paid.
If the debit later fails, Mindbody puts the money back onto the member’s account and removes the payment from the sale. FlexBooks has already synced that day and does not look at it again, so QuickBooks keeps a payment for money that never arrived.
The result is income recorded against cash you never received, an asset account holding a balance that will never clear, and a member who owes you more than QuickBooks thinks.
For the general version of this, see Why Doesn’t a Transaction in QuickBooks Match Mindbody Any More?
How we help you find them
We run a check for this each month and send you the list, with the sale IDs, the members and the amounts, so you are not hunting for them by hand. If you would like that started for your account, just ask us.
Between checks, the tell is a member whose balance in Mindbody is higher than in QuickBooks. Mindbody is right in that situation. It knows the payment failed and QuickBooks does not.
How to correct QuickBooks
Do not delete the original transaction. This is the part that catches people out. The sale itself really happened, the member really bought the thing, and the income is real. Only the payment is fictional. Deleting the sales receipt takes the income out of your Profit and Loss along with the payment, and then two things are wrong instead of one.
Correct it with a journal entry instead. For each failed payment:
- Debit Accounts Receivable, against that customer
- Credit the asset account named after your payment method, for example EFT
That leaves your income exactly where it is, takes the money that never arrived out of the asset account, and puts the balance back onto the member, which is what Mindbody has been showing you all along.
You can do all of them in one journal entry with a line per member.
Why not a credit memo?
A credit memo reduces income and gives the customer a credit. Here the income is genuinely earned and the member owes you more, not less, so a credit memo moves both of those the wrong way.
What if the member pays later?
Once the balance is back in Accounts Receivable, a later payment behaves normally. Mindbody records the payment, FlexBooks syncs it, and it applies against what they owe.
Do card payments have the same problem?
No. Cards authorise immediately, so there is no window in which a card sale can quietly become unpaid after we have recorded it. A disputed card charge is a different thing, and it is covered in Refunds, Chargebacks & Negative Transactions.