The MacGyver-esque approach to tracking gift cards and certificates

The MacGyver-esque approach to tracking gift cards and certificates

During these uncertain times, a lot of businesses are at risk, being forced to close or shut part of their operations. This specifically impacts restaurants, which cannot serve sit-down customers, but can keep the kitchen open for takeout and home delivery orders.

We have been urged on social media to support our local restaurants by buying gift certificates and cards for future purchases, so that these establishments have cash coming in during the crisis. That’s great, but how can we help our clients track these gift card and certificate sales in QuickBooks®?

Let’s get back to Craig, our serial entrepreneur. He found his construction jobs drying up, and turned to the exciting world of food service: he’s now running Craig’s Diner. Well, that was poorly timed.

Craig is closed to sit-down patrons – the bulk of his business. However, the kitchen is still open for whatever takeout and delivery business he can get. Because Craig’s Diner is a small neighborhood eatery, people are trying to keep it afloat by buying gift cards (in addition to getting takeout or delivery), which they were urged to do on social media.

How will Craig account for these gift cards that were sold? Unlike the takeout sandwiches that get made for each order and sold, gift cards are not sales revenue. In fact, we can view the sales of gift cards as deposits paid upfront by customers to Craig. That makes the sale of gift cards deferred or unearned revenue. This is a concept we discussed in my previous article on customer deposits, but there is a twist if Craig wants to track quantities and values. Let’s take a look.

Let’s set up an Other Current Liabilities account called Gift Cards in Circulation, so that Craig can know, at any time, the dollar value of what he owes to his customers at large. I used the Detail Type Trust Accounts – Liabilities because an argument can be made for the fact that these funds represent money kept in trusts for these customers.

Next, let’s create a non-inventory product/service item that’s mapped to this liability account called $25 Gift Card. We’ll make it non-taxable.

I’m giving this item a default price that’s consistent with its denomination. I’m also setting up a $50 gift card and a $100 gift card.

(Note: If there weren’t standardized gift card denominations and each card sold had a custom face amount, I could conceivably set up just one item for any denomination of gift card, mapped to the same Gift Cards in Circulation liability account, and I’d enter the total of the gift card face amounts sold in any transaction as the total price.)

Now, let’s pretend that Craig is using a QuickBooks Sales Receipt for each takeout or delivery order.

(Note: If Craig had a cash register or POS system printing out receipts instead, he could use zero-dollar sales receipts to summarize the total of each day’s sales in QuickBooks, rather than producing a sales receipt for each individual sale. But, in our situation, I’m using an individual sales receipt for each sale to illustrate this gift card concept, and I’m leaving out the names of the customer. Remember, customer names are optional in sales receipts.)

Let’s pretend a motivated customer is buying a bunch of gift cards, worth a total of $700:

The transaction journal behind the scenes indicates that there are no revenue accounts involved. Rather, this is just adding money to the liability account Gift Cards in Circulation:

The balance sheet now shows the $700 in Gift Cards in Circulation:

The Sales by Product/Service Summary report can be filtered for these specific gift cards, and shows what cards were sold. I have retitled the report, Net Sales of Gift Cards (it will track sales less redemptions), and saved the customization:

Now, let’s pretend that a few of the cards get redeemed on a sale two months later. Craig puts in each card that is used and its quantity (but a negative number because it’s being used up, not sold) to reduce the amount of money that has to change hands:

And, the proper amount of revenue is captured on the sales receipt, along with any taxes and the actual amount of money that was paid:

And, the same Net Sales of Gift Cards report for two months later shows negative numbers because gift cards were only redeemed in that month, not purchased.

The balance sheet for that date in June would indicate that the balance in Gift Cards in Circulation is $575 ($700 original purchase less $125 redeemed):

If we want to see exactly what is outstanding for each denomination (because, in my example, I created a separate item for each denomination), I can run a Sales by Product/Service Detail report for all dates, filtered for just the gift cards. That lets me see that the subtotal for each item is the outstanding number and their value, totaling the same value as the balance sheet for all dates:

I can retitle this report and also save the customization:

Lastly, I can click on the caret at the top of each grouping to collapse it and just get the totals:

That way, I see just what is outstanding, rather than all the details that got me to that balance:

I’m hoping you will use this to not only support restaurants, but also your small business clients who sell gift cards and certificates.

Stay safe and healthy.