Overview
If your business is approved for financing by Settle, you’ll be able to apply Extended Payment Terms (EPT) to use your working capital for qualifying invoices. When WC is used, Settle will pay your vendor upfront, and you will repay Settle the financed amount over a set period.
Since Settle pays the vendor on your behalf, your liability for this payment shifts from the vendor to Settle. To ensure your connected bookkeeping software stays up to date, we adjust your accounting ledger to reflect this shift in liability.
The WC sync process
Configuration
New Accounts:
When you connect with QuickBooks Online (Settings > Accounting, connect QuickBooks Online), Settle will automatically add the following to your QuickBooks Online Chart of Accounts:
"Settle Clearing Out" - a "cash" account, used to mark the synced Bill as paid
"Settle Loans Payable" - a Liability account, used to represent your balance owed to Settle due to financing and subsequent principal repayments
Settings:
Once QuickBooks Online has been connected, map the following two accounts (Settings > Accounting):
Settle finance fees - We sync all financing-related fees paid to Settle to this account. You should map to an account like Interest Expense.
Settle loan principal - We sync all transactions that increase or decrease your financing-related liability to Settle (minus fees) to this account. We automatically map it to the Settle Loans Payable account that we create, but you can modify if needed.
How it Works:
This section shows how each step in the WC process will be synced to your QuickBooks Online account, using an example.
(For a high-level summary of events involved in WC, see this help doc.)
Step 1:
A Bill from The North Face due on 9/1/2022 is uploaded to Settle. The Bill is synced to QuickBooks.
Date | Account | Vendor | Amount | Object Synced to QBO |
9/1/2022 | Debit (Dr.) Office Supplies Expense | The North Face | $1,000 | Bill |
| Credit (Cr.) Accounts Payable | The North Face | ($1,000) | Bill |
Step 2:
You decide to finance this Bill on 9/1/2022. Settle creates a fee Bill as of that date, which is then synced to QuickBooks Online.
Date | Account | Vendor | Amount | Object Synced to QBO |
9/1/2022 | Debit (Dr.) Interest Expense | Settle | $15 | Bill |
| Credit (Cr.) Accounts Payable | Settle | ($15) | Bill |
Tip: For customers who use Settle in conjunction with other two-way syncing bill payment software, we include a Memo for the Bill that says “No Action Required: Invoice scheduled to be paid in Settle”. This is a reminder that if the Settle Bills get pulled into your other software, that you do not need to take any action to pay them outside of Settle.
Step 3:
Your automatic payment to Settle is processed for the fee bill created above. A bill payment is synced to QuickBooks as of the date of fee payment.
Date | Account | Vendor | Amount | Object Synced to QBO |
9/15/2022 | Debit (Dr.) Accounts Payable | Settle | $15 | Bill Payment |
| Credit (Cr.) Cash | Settle | ($15) | Bill Payment |
Step 4:
Since Settle paid the original bill on your behalf, you now owe Settle the principal amount plus financing fees. We mark the original bill as paid and create a new liability to Settle. This comprises two transactions:
1. A Journal Entry
We transfer the liability balance that you are financing from Accounts Payable to the Settle Loans Payable liability account (or whichever account you mapped for Settle loan principal).
Date | Account | Vendor | Amount | Object Synced to QBO |
9/15/2022 | Debit (Dr.) Accounts Payable | The North Face | $1,000 | Journal Entry |
| Credit (Cr.) Settle Loans Payable | Settle | ($1,000) | Journal Entry |
2. A Bill Payment
We create a zero-dollar Bill Payment that links the Journal Entry described above with the original Bill, reducing the Bill’s balance by the amount being financed. The Bill Payment has a $0 impact to your books, and we sync it to the “Settle Clearing Out” account that we automatically create so that it does not clutter your bank registers.
Date | Account | Vendor | Amount | Object Synced to QBO |
9/15/2022 | Debit (Dr.) Accounts Payable | The North Face | $0 | Bill Payment |
| Credit (Cr.) Settle Clearing Out | The North Face | ($0) | Bill Payment |
Step 5:
Before repayment to Settle is due, you can repay a portion of your EPT loan early (more info here). For each repayment, we record a journal entry which reduces the amount in your Settle Loans Payable account accordingly.
Upon maturity of the WC loan, we record the repayment made to Settle, which nets out the impact of the original financing transaction on the Settle Loans Payable account.
Date | Account | Vendor | Amount | Object Synced to QBO |
12/15/2022 | Debit (Dr.) Settle Loans Payable | Settle | $1,000 | Journal Entry |
| Credit (Cr.) Cash | Settle | ($1,000) | Journal Entry |
Summary
The following screenshot illustrates the General Ledger impact upon transaction completion. The net effect is that you have repaid Settle $1,015, and incurred $1,000 of Office Supplies expense, and $15 of Interest Expense.
