Overview:
If your business is approved for financing by Settle, you will be able to finance qualifying bills. Through the Amortized Loan product, Settle will pay your vendor upfront, and you’ll repay Settle the financed amount in 30-180 days plus a financing fee.
The Amortized Loan differs from our traditional Extended Payment Term (EPT) product in that you will make monthly installment payments, comprised of principal and interest.
Since Settle pays the vendor on your behalf when you apply an amortized loan, the liability shifts from your vendor to Settle. In order to ensure your connected bookkeeping software stays up to date, we adjust your accounting ledger to reflect this shift in liability.
The 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 change this if you wish.
How it Works:
This section shows how each step in the process will be synced to your QuickBooks Online account, using an example.
(For a high-level summary of the events involved, see this help doc.)
Step 1:
A Bill from The North Face due on 1/1/2022 is uploaded to Settle. The Bill is synced to QuickBooks.
Date | Account | Vendor | Amount | Object Synced to QBO |
1/1/2022 | 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 1/1/2022.
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 |
1/15/2022 | 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 doesn’t clutter your bank registers.
Date | Account | Vendor | Amount | Object Synced to QBO |
1/15/2022 | Debit (Dr.) Accounts Payable | The North Face | $0 | Bill Payment |
| Credit (Cr.) Settle Clearing Out | The North Face | ($0) | Bill Payment |
Step 3:
Example:
Once you have made your first installment payment, we record the repayment made to Settle. We split the payment into the principal and interest portions based on the payment schedule.
Settle does not create a liability for the owed interest. We only record it as an expense at the time the installment is paid.
Date | Account | Vendor | Amount | Object Synced to QBO |
2/15/2022 | Debit (Dr.) Settle Loans Payable | Settle | $500 | Journal Entry |
| Debit (Dr.) Interest Expense | Settle | $25 | Journal Entry |
| Credit (Cr.) Checking | Settle | ($525) | Journal Entry |
You will see a repayment journal entry, similar to the one above, for each installment payment. The breakdown of principal versus interest will correspond to your loan schedule.
