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Credit card processing fees:OPEX or COGS?

Stephanie Clevenger's Profile

I work at a medical device startup and we have just started accepting credit cards from customers to pay their invoices and now I have to book the fees associated with the settled transactions. Should they be booked into an other COGS account or as an expense into my G&A dept? These fees are highly variable depending on my volume and type of cards used by my customers. I would like to get a feel for how others have treated these fees.

Answers

Topic Expert
Anand Goel
Title: CEO
Company: Optimized Payments Consulting
(CEO, Optimized Payments Consulting) |

although there are similarities of this expense between, OPEX and COGS, most of our clients record credit card expenses in SG&A. Amazon.com and Overstock.com record these as fulfillment expenses.

best,
Anand Goel

Clifton Rodney
Title: Controller
Company: Accountants On Site
(Controller, Accountants On Site) |

I have seen them both ways; my preference has been to include in S&GA to preserve margin. Comes down to company policy and consistency of treatment.

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

We treat them as SG&A using the thinking that the cost is part of our efforts to make collections.

Topic Expert
Paul Benedetto
Title: CFO, Director of Finance, Consultant
Company: Nextwave Software, Rethink Fabrics
(CFO, Director of Finance, Consultant, Nextwave Software, Rethink Fabrics) |

I agree with the consensus here, below the line. Although a good argument can be made that this is a flexible cost and thus deserves to be a component of COGS; credit card fees are a form of financing you provide a customer, no different than using a line of credit to facilitate say net 30 day terms to credit worthy clients. As such, I treat all these financing categories as non-operating activity items on the P&L.

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