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Mapping Customer Lending to Your Accounting System

Jenny Vaughn
Updated

Overview

When you activate Customer Lending, you'll need to connect your financing transactions to your accounting system. This ensures that loan repayments and fees are properly tracked in your accounting system, just like any other business expense.

Is this required? While we acknowledge this is not a true requirement, we are not shy in saying that we strongly suggest you take these steps to ensure accurate data in your accounting system. 

 

Why This Matters

Proper mapping ensures:

  • Accurate financial statements – Your balance sheet correctly shows loan liabilities
  • Clean expense tracking – Financing costs are separated from operating expenses
  • Easy reconciliation – Your accountant can quickly review financing activity
  • Tax compliance – Interest expenses are properly categorized for tax reporting

 

What You'll Need to Map

During Lending setup, you'll assign three key items to corresponding accounts in your accounting system:

1. Principal Repayment Account

What: The liability account that tracks your outstanding loan balance.

MarginEdge Category: Liability

Your Action: Select the liability account in your accounting system where you want to record the loan principal. 

  • MarginEdge: Liability → Your System: "Account"

 

2. Financing Fee Category

What: The expense account that tracks interest and fees charged on your financed invoices.

MarginEdge Category: Expenses

Your Action: Select the expense account in your accounting system where you want to record financing fees. This is typically an "Interest Expense" or "Financing Fees" account.

Example:

  • MarginEdge: Expenses → Your System: "Interest Expense" or "Financing Fees"

 

3. Repayment Vendor

What: The vendor entity that will appear on your repayment transactions.

MarginEdge Vendor: [me] Finance

Your Action: Select or create the vendor in your accounting system that represents MarginEdge as your lender. This ensures all repayment transactions are properly attributed.

Example:

  • MarginEdge: [me] Finance → Your System: "Vendor Name" (create if it doesn't exist)

 

Need Help?

Not sure which accounts to use? Your accountant or bookkeeper can complete this step for you later. You can skip this during initial setup and have them configure it before your first repayment.

Common Account Recommendations:

  • Principal Repayment: Current Liabilities → Notes Payable or Short-Term Debt
  • Financing Fees: Operating Expenses → Interest Expense or Bank Charges
  • Repayment Vendor: Create a new vendor called "MarginEdge Finance"

 

What Happens Next?

Once you've mapped these categories:

  1. Weekly repayments will automatically post to your selected accounts
  2. Your accounting system will stay in sync with your loan balance
  3. You can track financing costs separately from regular vendor expenses
  4. Your accountant will have a clear audit trail of all financing activity

Questions? Contact MarginEdge support or consult with your accountant about the best account structure for your business.